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We are Adding Comcast Exchange
Traded Debt to the High Quality Model
NEW
July 28, 2010 6 am
We will be adding Comcast exchange traded debt
(Ticker CCS) to our High Quality Model Portfolio. This
is just yielding 6 5/8%, but the Quality Portfolio target
is 7% so this will fit well. We are comfortable holding
Comcast securities as they are a quality company
and we perceive little risk in this company.
Additionally this adds further diversification to the
model.
This will bring the portfolio up to approximately 65%
invested so we still hold substantial cash , but are
reaching a point where we will gain more monthly
income---we have been very cautious to date and of
course we will remain cautious.
This issue goes ex dividend TODAY--so we may not
add this until the price sets back a bit.
Common Stocks are Dead
Money--Income Issues Perform
Damned Good
July 19, 2010 9 am
I think by now most folks have figured out that
common stocks are dead money (at best) and
owning them at this time is a very risky proposition.
Searching far and wide we don't find many real
reasons to be optimistic over the next 6 months.
Employment and employment outlook remain tepid,
housing fell off a cliff after the expiration of the federal
tax credit on April 30th and consumer confidence,
which had risen into the 60's feel sharply into the low
50's (per the conference board). Of course with the
lousy economy interest rates and fuel prices remain
very low (the silver lining I guess).
So given the poor outlook what is the income investor
to do? You have to stick with quality issues--although
at this point in time most income issues are
performing very well--even the poor quality ones. We
have not changed anything in the model portfolios in
the last month or 2 and they have performed very well.
One issue in particular that has performed well is TC
Pipelines (TCLP) which not only pays a nice 7% yield,
but has garnered a 10% capital gain since our
purchase in January. We hold this in our Blended
Portfolio.
We continue to hold substantial cash, and likely will
over the coming months--although we have some
great issues in sight and likely will deploy some of
our cash in this issues.
The Dangerous Market Conditions
Continue
June 24, 2010 4:30 am
Equity markets have been rather quiet in the last
week event though it has become more and more
evident that the U.S economy is slipping steadily
toward a double dip recession.
Of our 4 key indicators 2 are in serious
trouble--employment and housing. While the
economy can recover without employment growth-we
are more concerned with a worsening of employment
at this point as we watch housing plunge.
Interest rates are falling daily as that market points to
economic softening---even while the Fed is printing
money as fast as it can.
We are personally 50% invested while we have left
the model portfolios as they have been for the last
couple of months. Our personal porfolio is up 4.2%
this year while the S and P 500 is now down
1.8%--and we believe poised to head lower.
We believe at this time that further investing in
preferred shares and debt of anything beyond utilities
is likely not a good idea---and you can be certain that
we are staying away from further investments in
banking issues.
Knocked Offline for 4 Days
June 14, 2010 10 am
We hate it when it happens --but we can always be
sure that when you live in a somewhat rural area you
will have technical issues that knock you off the
internet. Last week we hit one of those times--but
now hopefully are back online and can give some
updates.
This Coming Week WILL Be a Tough
One
June 6, 2010 11:30 pm
Whoa is me. We are relatively certain this will be a
really tough week in the equity markets---why?
Europe is a mess--employment gains are non
existent--and housing sales are absolutely
plummeting. Forget the 'talking heads' that are
telling you anything good on the housing and
employment situation--they are either stupid or just
plain lying!!!!
We will be changing our investments assumptions
before the end of June--and while we wish they would
present an optimistic viewpoint we are afraid they will
be more on the 'double dip' side of things.
For now a person needs to 'batten down the
hatches'--meaning stick with the real quality issues.
Stay away from banks and other financials---make no
further commitments to the energy sector (royalty
trusts etc) and wait and see what develops. It is
critical to 'preserve capital'--there will be a time and a
place to pick up bargains in the weeks ahead--but
you need your capital to take advantage of these
opportunities.
One More Exciting Day Ahead - Then a
Rest
May 20, 2010 11PM CDT
OK - it has been a tough week for investors in
equities--we are fortunate to have very little common
stocks, oil trusts or master limited partnerships in
either the models or in personal accounts.
In the models Provident Energy (PVX), TC Pipelines
(TCLP), Pfizer (PFE) were 'bloodied' quite a lot---but
the other dozen or 2 holdings in models and personal
accounts held up quite well. The S and P 500 is off
near 6% this week so far while our accounts are off
1.5-3%---it was also helpful to have been carrying a
lot of 'cash' in the accounts.
We have not looked at everything we own closely, but
we have noted that a number of our 'small company'
preferred have done perfectly. They are very
boring--just like we like them. These issues were SY
Bancorp Preferred (SYBTP) Sterling Bancorp
Preferred (STL-PA) and Willis Lease Finance
Preferred (WLFCP)---these have barely moved all
week---just perfect.
At this time, while we see what look like
'bargains'--we can't be a purchaser of anything. We
expect a bounce sometime soon, but we don't truly
see stable equity markets for months.
High Quality Portfolio to Sell Credit
Suisse Notes
May 19, 2010 8 PM CDT
We have held Credit Suisse 7.9% Exchange Traded
Debt (Ticker:CRP) in High Quality Model portfolio
since September, 2009.
Credit Suisse is a highly respected Swiss investment
firm which we hold in fairly high reqard and at 7.9%
we anticipated holding this security until it was called
sometime after 2013.
Unfortunately with the upheaval in Europe it is most
prudent to sell this before it gets 'hit'. At this point it is
holding up and we will break even on the sale--but
anything could happen in the days and weeks ahead
and given that this is our 'high quality' model it is best
to exit at this time.
We Have Finally Let Windstream (WIN)
Go
May 11, 2010 10 PM
Way back on April 4th we stated we may sell our
Windstream shares in the Blended Income Portfolio -- well
finally we have done so today at a price of $10.70.
In general we have always had concerns with some of the
telecoms because they are losing land lines and replacing
them with other services--cable tv etc for a near break
even net revenue. They all carry very high levels of debt
and they all pay very good dividends.
Windstream missed their expected earnings for the quarter
recently ended and we believe that earnings may trend
down from here. Given that we have a large capital gain
on the shares, which we have held for 8 months, we just
decided to unload the shares.
A Strong EU Response Brings a
Strong Market Response
May 10, 2010 9 pm CDT
A massive strike by the EU at Euro bears dealt them a
knockout blow---for the time being. From our perspective
the stability that this will bring to the marketplace will make
our jobs as investors much easier. Likely that the major
European Banks are now backstopped just as the major
U.S. banks were last year.
Below we mention a number of issues on our 'watch
list'--we will now be watching carefully as we may just
snag a few of these issues (or issues very similar). These
would be small, well diversified purchases.
We believe that the equity markets will continue some level
of gyrations in the weeks and months ahead, but should
generally remain flat. The higher quality income issues
should remain stable in the weeks ahead as well.
Our economic assumptions remain the same as outlined in
articles below--although we could see a slight slowing in
economic growth as ramifications of tighter credit
standards grip the world.
A Few Issues for Your Watch List
May 9, 2010 8 PM CDT
While the markets are in turmoil we may see some
opportunities come from the turmoil.
These issues may become more attractive in the
weeks ahead, but a person must do due diligence
and understand the tremendous risk that may come
with long term income opportunities. This is not a
recommendation to buy any security--just some
issues we have our eye on.
GFW AAG Holding 7 1/2% Debentures
Current Price 22.02 Current Yield 8.52%
INZ ING Perpetual Debt Securities
Curent Price 18.05 Current Yield 9.97%
AEF Aegon NV 7 1/4% Perpetual Capital
Current Price 19.15 Current Yield 9.46%
DTK Deutsche Bank Trust Preferred 7.6%
Current Price 22.81 Current Yield 8.33%
Each of these issues traded as much as 20% lower
than their Friday close--with corresponding higher
yields.
Some of these issues (as well as many others) may
trade MUCH lower in the days and weeks ahead as
they will be tremendously affected by the European
situation.
We are watching these as they may trade so low that
they become raging buys---and then again if the EU
collasped so could these issues.
We Have Bought Xcel Energy Debt
May 7, 2010 9:45 am CDT
Even though we had planned to not buy until at least
Monday (see below) we saw Xcel Energy Debt (XCJ) fall
over $1.00 so we went ahead and moved in for a buy. This
gives us a yield of near 8% on a very good issue--and right
now utilities are where we feel safest.
Foreign Markets Tumble--Regain
Footing. U.S. Futures Pointing Higher
May 6, 2010 11:30 am CDT
With the employment report tomorrow and the situations
from today carrying over most anything can happen on
Friday. Futures on equities are up strongly tonight--and
foreign markets are getting their footing, at somewhat lower
levels, we would expect a very choppy day on Friday.
We believe that long term income investors should not
overreact. If one has quality preferreds and debt issues
that took a hit they likely will bounce back nicely in the next
week or two. If you hold Santander, Barclays, RBS,
Deutsch Bank or ING preferreds you likely have been
bashed. In this case how much pain can you take? It is
likely that these will be OK--but at this moment who knows
really. Note that we hold none of these issues either
personally or in the models. Notice to the right in the
column from March 8 that the RBS issue which was in one
of the Models was sold--we didn't trust the British
government--or any European government for that matter.
We will be looking for bargains tomorrow, but likely won't
buy anything until at least mid-day on Monday. We will be
looking at non-financial preferreds--for instance BG and E
preferreds, Empire District Electric and Xcel Energy debt
issues , US Cellular Debt and other safe issues which may
go on sale.
Hi Volume/Hi Volatility Traders Damn
Near Crater Markets--While Mom and
Pop Get Slaughtered
May 6, 2010 5 pm CDT
Updated May 6, 2010 6 pm CDT
Some of us are trying to 'invest' while Wall Street trading
firms, hedge funds etc are doing their best to totally muck
up the markets -- creating markets that are damned scary
for mom and dad. We have lived through the crash of 1987
and other crashes and yet were still amazed to watch the
Dow drop by 4-500 points in the matter of minutes--basis no
real new news. No matter the cause of todays plunge you
can bet there are fewer investors for the markets tonight
than there was early today--folks are getting more than a bit
tired of getting screwed by these greedy bastards.
Unfortunately these actions will likely hurt even us
'investors' as the regulators will move in and legislate laws
which go way over the top.
The Model Holdings
While the model holdings had held up well during the recent
downturn some of the issues finally got nailed today. In the
High Yield Model Otelco (OTT) was off around 10%
--Selective Insurance Exchange Traded Debt (SGZ) was off
6-7%. We think that SGZ likely is giving us a 'sale' price.
Provident Energy (PVX) is also off sharply as oil has
tumbled hard. The good part is the total portfolio is only
35% invested so we have dry powder when some items go
on 'sale'.
In our Blended Income Model TC Pipelines (TCLP) has
gotten creamed although their income is only very
modestly tied to oil and gas prices. Also Windstream (WIN)
got smacked and honestly we had meant to sell this holding
as we believe forward earnings will be weak.
Opportunity Ahead
Below we mentioned Banco Santander, Deutsch Bank and
Barclays Preferred shares as 'dangerous'--but in fact they
are just dangerous today and tomorrow--it is likely they will
present tremendous opportunity in the near future.
Additionally everyone should have plenty of cash in their
portfolio (at least in our models and real money accounts
have had more than 50% cash for almost 2 years)--and it is
at times of distress that we can pick up some bargains.
This link gives you all closing prices each day for all
Preferred shares and Exchange Traded Debt shares on all
exchanges. This is a great resource to skim each day to
see what has gone 'on sale'. Of course a person needs to
do more due diligence--but it is a great starting point. We
see a number of issues that we will be watching in the days
and weeks ahead for buying opportunities.
The Beatings Continue--Some Issues
to Watch
May 6, 2010 12:30 pm CDT
Well the beatings continue today and even we are feeling
some pain. The Greek parliament passed their austerity
measure (what choice did they have?), but this by itself is
meaningless as the other EU countries have to pass it and
then it has to be implemented.
Today anyone that holds debt or preferred shares of
Deutsch Bank or Banco Santander should be out of those
holdings. They have been beat up quite a bit already--but if
there is another glitch in Europe you could see these
issues fall 20 or 30% (or hell even 50%) in a replay of what
happened in the U.S. in 2008. I think that maybe even
Barclays Bank holdings should be unloaded. Both Deutsch
Bank and Barclays have tons of preferred issues out there.
While it is wise to be out of these issues now it may present
a wonderful opportunity in the future. In early 2009 we
bought many preferreds at huge discounts and doubled our
money on them--but that time is not now.
Markets Stabilize---For the Time Being
May 5, 2010 11 am CDT
After falling off a cliff early this morning the equity markets
have stabilized and moved a bit higher. Treasury Yields
(on the 10 Year) hit a low in the 3.5% area and since have
bounced to 3.56%.
We think it is fair to say that the Greece, Portugal, Spain
etc., situation will be with us for weeks to come and the
income investor has to--as always--check their portfolio at
least once per day.
The employment report later this week, which is expected
to be positive--but only mildly so, and the need for Germany
to approve the Greece bailout package by the weekend
both have the ability to send the markets into a tail spin if
there are any surprises.
Of course there are some positive out their--the turmoil has
lowered oil prices which should translate to a little relief at
the pump. Additionally the Canadian Royalty Trusts have
set back a bit and Provident Energy (PVX), Pengrowth
(PGH) and Penn West Energy (PWE) are all worth looking at
with yields in the 8-10% area.
Equities Pounded--Treasury Yields
Continue Plunge
May 4, 2010
It has been an exciting time in the last week as
most of the economic stats domestically that we
were expecting have come to fruition--essentially
slow recovery. Of course we were not expecting the
European sovereign debt issue to get this far out of control
which has resulted in plunging Treasury Yields as
investors race for safety (although you have to wonder
about the future safety of this move).
We are fortunate in that almost all of our investments--in
particular preferred stocks and exchange traded debt
remain fairly solid, while some of the master limited
partnerships, common shares closed end funds have
gotten hit a bit harder--but generally we are well satisfied
with our portfolio performance through these uncertain
times.
As you have may have noted we have not sent any
'highlighted' security emails out for a few weeks as we are
waiting for the marketplace to settle down before moving
forward with further investments (personally and in the
models).
The balance of the week will be exciting in that we have the
monthly employment on Friday and between now and the
weekend we have the EU dealing with (approving?) the
Greece bailout. We are skeptical about the strength of
employment and generally think the report will indicate job
growth--but not very strong growth. We are ok with this for
now as it would dovetail with our forecast.
We think an income investor should mainly sit tight at this
stage--holding some cash to be deployed when the current
turmoil gets ironed out.
Wild Ride with the Greece 'Situation"
April 27, 2010
With the downgrades of Greece and Portugal debt today
markets around the world tumbled and in spite of a poorly
received treasury auction yields fell as a 'flight to safety'
took place.
It is nice to have the equity markets tumble as they were in
need of a breather from the never ending move upward.
Additionally this gave us an opportunity to add some
shares to our 'High Quality Model Portfolio". We have
added 500 shares of Sterling Bancorp Trust Preferred
Shares (Ticker STL-PA) at $10.00 per share. This was one
of our recently highlighted issues which can be seen here.
Please note that this issue is callable at $10.00 (plus
accrued interest) at any time. We continue to try to get
some safe holdings in our underinvested portfolio and we
think this is a good holding with a current yield of 8.38%.
CNBC BS on Trust Preferred Shares
April 22, 2010
This morning I just happened to have CNBC on for a
moment and was unfortunate enough to see Cassandra
Toroian who is President of Bell Rock Capital (whoever the
hell that is) say that you should sell your Trust
Preferreds--because they are essentially bonds----well at
least she got that part right.
We have studied the relationship between interest rates in
general and the pricing of Trust Preferreds and of course
there is a relationship---but within a given range the affect
that rising rates will have on the shares is minimal. We
looked at some higher quality issues--such as the Trust
Preferreds from JP Morgan and found that if interest rates
(as measured by the 10 year treasury) rose by 1/2% the
price of the Trust Preferred would move down by 3-5%.
Hardly a major disaster.
I think we can agree that rates in the next year are likely to
move higher---but when that is and by how much is an
unknown. If they were to move up 1% or more quickly there
would be damage to Trust Preferreds--but to move up 1/2%
over the course of 6 months is an entirely different story.
Of course very long term holders--buying for income have
many different motivations than those on Wall Street which
would like you buying and selling every day.
We are holding any Trust Preferreds that we own either
personally or in the model portfolios. When the time comes
to sell these issues it will be when rates are above 4% for
sure---and likely at some point above 4.25% (on the 10
year). Tossing these out at this point is pure silliness.
Equity Markets Tumble on Goldman
Charges
April 16, 2010
Well today the SEC charged Goldman Sachs with civil
fraud--gee wiz--what a surprise. We likely already knew
that Goldman was playing both sides of mortgage security
deals--but this may get to the bottom of the story. Also
charged was a Goldman vice president (a ripe old age of
31)---they should charge Goldman with stupidity for allowing
31 year olds to screw around with important stuff. Of
course it is this kind of crap that has us investing only in
'income' securities.
Bond yields tumbled today on a weak University of
Michigan consumer sentiment report--10 year treasuries
have fallen to a yield of 3.78% after going over 4% just a
couple of weeks ago. Consumer confidence is the 1 trend
we just can't seem to keep going in the right direction---1
month it's up and the next month it is down. The next
employment report has to be good or rates are going to fall
further and we will again question the 'double dip'.
For this minute we remain constructive with our view
remaining slowly improving economic condition as most
indicators (and profit reports) remain positive. We expect
that we will remain this way until the next employment
report and then we will re-evaluate.
Well the Numbers Are In -- Now What?
April 4, 2010
Well the economic numbers came in for the week
and we think these, by and large, verified our
beliefs--a very slow improvement overall and with
it an upward bias in interest rates.
We think that since the most important
number--employment--showed some job growth--although
modest, that equity markets will maintain their 'Goldilocks'
path--drifting upward. We are just hopeful that interest
rates, as they rise will not go higher too quickly--a drift up
will give us time to adjust to the higher rates as they go up.
Next we are moving into earnings season (for the quarter
end 3/31) and again we believe earnings will prove
adequate--and things will move slowly forward.
Our worries remain a possible double dip since housing in
particular looks very weak (and with interest rates moving
higher not likely to improve). Also potential 'debt bombs'
are all over the world--just waiting to explode and we worry
about these.
For now we remain conservatively invested--with plenty of
cash in the accounts---looking for solid and safe yields.
Maybe the Most Important Week Yet
this Year
March 28, 2010
Through the first 3 months of 2010 we have had all kinds of
economic information---some of it good--some of it
bad--some of it just downright confusing.
It is our opinion that the economic news to be released this
week will give us a damn good idea of whether we are still
on the gradual recovery path OR whether we are staring a
double dip recession straight in the eye.
First off this week we have Personal Income and
Spending---we have no idea where these will come in, but
we believe they need to show at least flat income and
hopefully at least a small tick up in spending.
On Tuesday we have retail sales as defined by the
Redbook Survey, the Case Shiller Home Price Index and
the Conference Board Consumer Confidence Index.
Wednesday we have the Mortgage Bankers Purchase
Applications, Chicago Purchase Managers Index, and
Factory Orders.
Thursday we have Jobless Claims, Construction Spending,
Institute of Supply Management Manufacturing Index,
Construction Spending and Vehicle Sales.
Lastly on Friday we have the March Employment Report.
These reports cover all of our key areas that we watch to
get a real read on the economy. In general we need most of
these reports to be at least ok (not major surprises to
expectations) and in particular we need Consumer
Confidence to move up from the last report and we need to
see a positive surprise beyond census hiring in the
employment report.
Our sense is that almost regardless of the stats this week
the equity markets are going to correct here (which means
little to us) and it appears that treasury yields have seen
their lows for the year as they seem to be in a march
upward. We are concerned about rates it they spike too
high, too fast. If they move up slowly (a few basis points a
week) we are not concerned---any more major upmoves
likes last weeks 1 day move of 15 basis points we will
become much more concerned.
For this very moment we don't see any change in our
strategy and will add quality items if we find them.
Our Current Economic Assumptions
Added 3/23/2010
We thought we should add a 'blurb' on our interest rate
outlook. It is simply our belief that rates will climb
gradually throughout the year. By this we mean that the 10
Year Treasury will move up from a current rate of 3.68% to
near the 4.25% rate by year end. Up to the point the huge
demands of the government to finance its deficit has not
had a great affect on rates--we assume that this will
continue as the recovery will be weak enough that
demands for money from the private sector will remain
modest.
March 22, 2010
As a prelude to any investment one (anyone) must have a
belief in certain assumptions about the future of the
economy in general. We thought we should go through
where we believe we are headed in the U.S. economy.
We have previously listed the 3 key items we believe are
critical to the resurgence of the general economic health of
the country. Our view is the most important item we need
to see improve to feel secure in the future is consumer
confidence. Of course consumer confidence is derived,
generally, from the state of many items---items such as
cost/price increases (PPI/CPI), the level of interest rates,
the price of fuel (or commodity prices in general), the level
of employment---and the current and future outlook for each
of these items. Our 2nd most important item and really a
part of confidence in employment--we believe this is
obvious. 3rdly we believe that fuel prices--mainly at the
gasoline and diesel pump (the most visible to mom and
pop) are a key factor. Now we add a 4th item to our 'key
factors'--Housing. By 'housing' we mean the whole ball of
wax---values, housing starts, sales, foreclosures etc.
Our outlook is as follows--
We believe that the unemployment rate will improve over
the course of the rest of the year. The current rate is
9.7%--and we see a drop toward 9% by years end. We
understand that there is huge noise in these statistics with
all the extended benefits out there and this being a census
year with the concurrent extra hiring. We believe that
consumer confidence drives from the 'headline' rate and not
the underlying detail.
We see the price of a barrel of oil trading at a price no lower
than $75 and possibly as high as $100. Thus we see
gasoline at the pump of from a low of $2.49 to as high as
$3.49 (these are Minnesota prices).
Relative to housing we see a little postive change, but not
much---somewhat soft sales, stabilized values, very modest
new construction (and then of mostly modest houses) and
continued foreclosures----overall a slight positive change.
Higher mortgage rates will hinder anything beyond modest
improvement.
Lastly we see consumer confidence as measured by the
Conference Board (current conditions) as starting to
improve beginning with the report of March 30th and slowly
climbing toward 65 by the end of the year. Note that the
measurement plunged by 10.5 points with the last report.
Below is a chart through the last report.
Now we realize that we may have to revise our economic
outlook beginning as soon as tomorrow or the next day---but
if we didn't have an outlook that was mildly positive we
would just crawl in a hole and forget about investing---put
the money in CD's at 1% (or whatever measly rate).
Our outlook tells us to continue to carefully invest--pretty
much 'steady as she goes'. Continue to weed out shares
that become severely overvalued and those that appear to
have become riskier than our situation allows us to hold.
This means we will continue to likely hold fairly high levels
of cash (say 20-40%) in our models and in our personal
accounts. This puts our investment goals at risk as cash
pays so little--but we would rather miss our goal than toss
money away.
Junk Stuff Sprints Ahead--Much
Faster Than the Quality Stuff
March 14, 2010
We have been very cautious of late (of course we
are always chickens) and have weeded out some
of the 'crap' from the 'High Yield Model Portfolio'--only to
watch those issued march ahead (Stonemor Ticker:STON in
particular). Here is a chart of the gains on Stonemor (which
we consider a true 'high yield' issue (read--high risk). We
are relatively certain that Stonemor will get beat up in the
near future as they release earnings this coming Monday
and the odds that they will disappoint have become pretty
high with the units trading at this high level.
We also sold some Royal Bank of Scotland Preferred
(RBS-PG) which is a very low grade preferred--as
evidenced by its $13.00 share price.
In the last few months we added Otelco (OTT) which is a
high yield telecom that had a 12% yield--now the share
price has sprinted ahead 20% (and of course the current
yield has dropped). Recently we purchased Red Lion
Hotels Trust Preferred (RLH-PA) for the over 10% yield--and
now it has moved ahead in the last week---we would have
been quite happy with just the yield--and once they race
ahead 10-20% in a short period of time we question whether
we should just take the capital gain and exit the position (of
course this is a good position to be in). Given that we think
the 'high yield' sector has gotten so far ahead of its self I
guess something with a relatively quick 20% gain should
just be sold and repurchased if it sets back.
Speaking of chasing yield---Citigroup came with a huge
Trust Preferred offering which was oversubscribed and it
comes to the market 1/4 to 3/8% less than expected.
Nevermind that they are government controlled---and
remain a low quality issue.
The 1 month treasury bill which had a yield of just 1 basis
point as recently as 6 weeks ago is now yielding 10 basis
points. As fear is introduced into the marketplace rates go
very low--as investors become complacent and chase risk
(yield) these yields rise .
It is becoming obvious to us that investors are really
stretching for yields--no not to the point where we see a
market collapse--YET, but as time goes by there is no doubt
that interest rates are going to streak higher--the only
question is when?
And it is our opinion that if you listen to any of the large
Wall Street houses (Goldman, Morgan Stanley etc.)--and
don't form your own logical opinion you are being lead
down the path to slaughter. They want you all in the
markets as quickly as possible--you can bet that they are
making bets directly against many of the investments that
you are making---if it is legal (forget about morally
justifiable) Goldman is doing it.
Adding to the High Quality Model
Portfolio
March 8, 2010
We are adding shares of SY Bancorp Trust Preferred to our
High Quality Model Portfolio. These shares have a current
yield of 8.8%---and in our view are top notch qualiy. The
company has not lost money in the last 4 years and recent
results are great in this environment.
This selection went out in our email highlight to subscribers
during the last 8 days (and volume spiked way above
average) and the pricing of the issue remains attractive at
this time.
Check it out here--SY Bancorp Trust Preferred.
If you are 100% Invested You Are
Asking For Trouble
March 2, 2010
We have kept our personal portfolio and all of the
model portfolios in the 30 to 60% invested range for
the last 3 months specifically because we remain
cautious as we have not been able to figure out if
the next economic cycle is another recession--a
depression or a recovery. While we need to be
further invested to make our goals---the first
priority is capital conservation.
Only 2 weeks ago the Fed raised the discount
rate--primarily as a 'shot across the bow' signaling
that rates won't remain low forever. Then
yesterday the Obama administration begins to tone
down expectations for the employment numbers to
be released later in the week. One month
consumer confidences goes up--the next month it
plunges
Then we have the sovereign debt situation -- in
Greece ---and really everywhere. In the case of
Greece Goldman Sachs gave help to the
governmental 'cooking of the books' (what won't they
do if it is legal and they can make a buck?).
The U.S just continues down the road of one stimulus
package after another. We had cash for clunkers and now
we may have a new program for home energy efficiency -
on top of various tax credits we already have available.
Unemployment compensation extensions just never seem
to end and new debt is issued every week which equals our
total annual deficit from just a few years ago.
Now with all that being said we are simply positioned in
such a way that we can exit the market quickly if it is
required----and because a major market moving event could
come quickly it is most important that one preserve their
capital (in our case by letting half of it rest at paltry money
market rates).
Time For More Extreme Caution
February 18, 2010
Well the Fed hiked the discount rate today in a move that
they had telegraphed was coming, but the after market
hours move put the futures market in a tailspin. While this
doesn't really mean much in the short term to the general
public it does send the message that extremely low rates
will not last forever---this could send the various markets
into a tail spin for a day or 2 it likely will blow over
relatively quick.
This is just one more reason that we have kept our
personal portfolio relatively liquid and have not rushed to
get the models fully invested (although we make some
changes below)--there are too many uncertainties out there
and the employment market doesn't really seem to be
improving much, if any.
Some Changes to the Model Portfolio
We will make the following changes to the model portfolios
early next week.
To the Blended Income Portfolio
We will add 400 shares of Red Lion Hotels Capital Trust
(Ticker--RLH-PA). This is a 10% yield issue----we
highlighted this issue in our last email note.
Additionally we will sell calls against our 500 shares of
Ship Finance (SFL). Selling the May $15.00 strike has a
potential to add 1-2% per month to our return on this issue.
Remember that selling covered calls is considered more
conservative than simply owning the common
stock---assuming you plan to hold the stock indefinitely.
To the High Yield Income Model Portfolio we will add the
same Red Lion Capital Trust--400 shares. With the 10%
current yield the issue fits both of these portolios quite well
and we feel that Red Lion is a well manages corporation
and as safe as possible in this environment.
Whats Next???
February 7, 2010
After a week in which the S & P 500 index fell as
much as 5% from the weekly high to the weekly
low--and ended up down 2% on the week what is
next, for us, the income investor?
We have reviewed the model portfolios and are
considering whether it is time to unload energy
related common shares (Provident Energy-PVX and TC
Pipelines-TCLP). We think it is likely that we will keep
TCLP and sell the PVX in which we have a rather large
gain. Energy prices continue their move down and the
continued weakness in the employment marketplace
indicates that demand is going to remain weak. Given that
the models remain underweighted in equities we don't see
urgency in making further changes at this time. The
models and the personal portfolios took only minor damage
last week--and unless we see further fiscal turmoil in the
European economies we don't expect too much further
weakness in our issues.
As we are searching for new investments we likely will
only make commitments in the near future to high quality
issues---as the lower quality issues will get hit if we are
wrong on economic stability and we start to double dip the
economy.
Interest rates which had traded in a 15-20 basis point range
the last month or 2 fell out of the range with the
announcement of the poor employment numbers. We think
they likely will creep back up this week (unless we get
more panic in Europe and a big flight to safety takes
place)--but it looks like we are months away from what we
think will be a 1/2% (or more) rise in rates. Of course this
thought could change if we escalate trade fights with the
Chinese and they stay away from our treasury auctions.
Third Leg to Recovery Not Likely to
Appear Soon
Employment isn't going to improve anytime soon
February 4, 2010 Noon
With the equity markets in somewhat of a freefall
today and treasury yields plunging because of
lackluster employment prospects and sovereign
debt issues around the world we would be quite
surprised to see a recovery of any magnitude in the
U.S. anytime soon.
We have reviewed the model portfolios (as well as
our personal portfolio) and are well satisfied that
we will generally weather the current storm in fine
fashion. While we haven't calculated the model
portfolio damage--we have calculated our personal
portfolio and our losses are a tiny fraction of the
general equity market losses (1/4 of 1% loss
versus over 2% on the S & P 500 loss).
At this time and with the current uncertainties one
should be reviewing their income issues and considering
weeding out some of the lower quality issues---if we should
double dip this recession the weak issues will be at high
risk for loss of payouts.
We are maintaining fairly high levels of cash in all
portfolios as there is no rush to invest---there are always
bargains coming available.
Still a Slowly Improving Economy???
January 26, 2010
With the Conference Boards Consumer Confidence
numbers we have now fulfilled 2 of our 3 legs that
we need for a real recovery. Consumer
Confidence is not moving hugely higher but instead
is just moving gradually--which we prefer for a
lasting recovery.
Prices of fuel, and in particular gasoline, are
moving a bit lower (although we need this to be
only slightly lower--just not dramatically higher--not
higher than around 2.70 on gasoline).
Our third leg is employment--the most important and
likely the most difficult to get moving in the right directly.
The next employment data is released on February 5, 2010.
Our view is that this will be a somewhat neutral number --
we are not personally seeing anecdotal evidence of
employment
We get the feeling that this is going to be a very gradual
recovery. With 1 month Treasury Bills trading at 1 basis
point it is obvious that there is still a lot of fear out there
and the possibility of a 'double dip' is still looked at as a
possibility--in fact it is personally our greatest worry
Our best guess is that the equity markets will essentially
go no where in the next month and income issues that we
invest in will remain stable.
We continue to stay away from most REITs and the
Shipping and Transportation issues (excepting select REIT
preferred issues) as they do not fulfill the goal of giving us
decent 'income' at this time. The biggest hazard to equity
markets right now is the Obama Administration which is
continually beating on the marketplace as it is the populist
thing to do.
Dow and S & P Get Smacked--Income
Issues hold Up Well
January 22, 2010
Finally with the big smackdown of Thursday on the Dow and
S & P stocks we can see the good results of holding a
decently diversified income portfolio. With the Dow off 2%
and the S & P 500 off 1.9%, in general, our models and
personal portfolios were off much less than 1%. These are
the types of results we have looked for--a preservation of
capital with decent income on the portfolios. Our
expectations are that when the equity markets are down we
will see much smaller directional moves in our portfolios.
As you may have noted we quit covering REITS more than a
year ago simply because with the exception of selected
Preferred issues (as well as some of the healthcare REITS)
the REITS are very dangerous. Just glancing over the
Commercial/Industrial REIT Sector we noticed that on
average they were off 4% on Thursday--twice the Dow loss.
There really is no improvement in sight for many REIT
areas and we believe that before improvement comes there
is much more pain to be had by some of the companies.
Use extreme care around the REITS.
Time to Let Supertel Preferred Go
January 16, 2010
We have held 400 SuperTel Hospitality Preferred shares
(Ticker:SPPRP) in our Blended Income Model Portfolio
since 3/18/2009 and they have paid us an annualized yield
of over 10% (based upon our $6.44/share purchase
price)---but at this time we think it is time to sell these out of
the model. We have a decent capital gain on the shares
and it is seldom wrong to take a profit.
The issue is this---like most Hotel/Motel REITS SuperTels
(Ticker: SPPR) profits have been poor over the last
year----Funds From Operations (FFO) remains very
modestly positive. Obviously they are paying no dividend
on the common shares--which conserves cash--and they
sold 2 more properties in October, 2009 which again will
help generate some cash. Even with these measures It is
our belief that the hotel/motel business is only marginally
improving and if a REIT needs to conserve more cash they
will turn to a suspension of any preferred stock dividends
they are paying. The December quarter is a slow quarter
for SuperTel and depending on results they could look at
suspending the preferred payout.
Quite simply---we had counted on an improvement in the
sector by this time and not seeing that happening we are
happy to take our profits and search elsewhere.
It is our belief that any dividend suspension would send the
share price from the current $8.25 to around $2.00.
Model Portfolio Additions
January 5, 2010
Today we have added a few issues to our model portfolio.
1st we have added almost a 7% position in TC Pipelines
(Ticker:TCLP) to our Blended Income Model Portfolio. This
is a Master Limited Partnership which was the subject of an
email we sent out a few weeks ago--you can read our info
here.
2nd we are adding BGE 6.2% Capital Trust Preferred
(BGE-PB) to our High Quality Model Portfolio --we will add
almost a 6% position. This issue has a current yield of just
under 7% and at around $22/Share we think it has a good
5% of upside on the capital gain side in the next year--which
would give a total return of 12%--way above our 7.5% goal
for this portfolio. You can check out BGE (Baltimore Gas
and Electric--a unit of Constellation Energy) here.
Watch Your Bond Funds
December 29, 2009
As we get close to closing out 2009 and are looking at
interest rates that have now moved up near 1/2% in the last
couple of weeks you need to review your portfolio with
particular emphasis on high yield bond funds.
Through the course of the year high yield funds have had
dramatic returns--we have held a number of funds off and
on and the capital gains have been hugely helpful to our
portfolios. Currently we hold the Pimco High Income Fund
(PHK) in our Blended Income Model Portfolio as well as in
our personal portfolio and have more than doubled our
investment. These high yield funds ARE leveraged funds
and could give back a fair portion of their share price gains
in the next 6 months if interest rates rise. While the yields
are good we plan to sell these from our portfolio this week
and not give back any gains on these issues.
OTELCO Goes on Sale
December 17, 2009--Noon CST
Earlier this week we sent out an email note to those signed
up to receive it on a little Telecom company named
OTELCO (Ticker:OTT). Today the general market selloff has
presented an opportunity for us to pick up some of this
issue for our personal account and for our HIGH YIELD
MODEL PORTFOLIO at sale prices. The issue started the
week in the $14.50 range and now has traded down to
$13.80, as we write this, on some large block sales. The
current yield is over 12%.
Check the company out here.
Seemingly Closer to Recovery?
December 10, 2009
We have said in this column for a number of years that the
recovery of the U.S. economy is predicated by 3
items---consumer confidence, fuel prices and employment
Of course a large part of confidence is driven by
employment and fuel prices (for transportation and for
heat).It appears that employment is healing (if you believe
the numbers) and in recent days energy prices have
moderated (although nat gas has moved up some--the one
we see day in and day out is 'at the pump')---so we need the
confidence part to get to the positive side of things.
As this chart shows (from 'The Conference Board")
confidence has been relatively flat the last couple of
months and we believe that we are due for a move
up with the next reading (around 12/23) simply
because of the lowering of the unemployment rate
and the declining price of fuel at the pump. These
types of data tend to 'feed' on each other and we think
that is the case here.
What does it mean outside of things are getting a little
better? We think it means very little
at this point in time--we think stocks are going nowhere
over the next 6 months as they have gotten ahead of
themselves. We think interest rates are going nowhere
over the next month, but may move higher in the next 60-90
days in reaction to perceived economic strength.
PLEASE NOTE that 1and 3 month treasury bill rates remain
at extremely low rates meaning that there is a lot of money
willing to accept a negative (inflation adjusted) return to
keep their money safe. Quite a few people are NOT willing
to believe that things are getting better.
Caution Needed on Royalty Trusts and
Limited Partnerships
December 7, 2009
We spent time this weekend reading some quarterly reports
which reminded us of the particular care that must be
taken when purchasing Canadian and US Royalty Trusts or
Master Limited Partnerships.
We all know that the companies of the sectors mentioned
generally explore for and produce oil and natural gas. Of
course they forward sell much of their production when
prices spike up which helps maintain their generous
distributions to holders of their securities. With these
hedges there are benefits and in some cases there are high
risks. Some of the companies simply explore for and
produce natural resources---others explore for, produce and
transport natural resources. Others explore for, produce
and process products---and this may included purchasing
product from others and this can produce large future cash
liabilities--which are a hazard to the distribution.
For Instance take Paramount Energy--a Canadian Royalty
Trust--mainly focusing on natural gas. Over 50% of their
stated revenue is hedging income from forward sales or
financial hedges of gas (actual price for the quarter was
$3.41/mcfe (Canadian Dollars) while the realized price with
hedging was $7.51). If we are to assume that natural gas
prices stay low---over time-- the company will not have the
financial hedges in place to replace the revenue--and thus
the payouts will have to be reduced further (the current
yield is 12.5%).
These companies are not foolish---when prices go way up
they forward sell their production---but not all their
production and only forward for a year or 2 at most---so
while they are able to maintain payouts for some amount if
time it is a future risk.
Now if you look at Provident Energy Trust (which we have
held, but are considering selling) which has a midstream
business it is a different story. The midstream business
purchases natural gas on a forward basis from others -- and
currently they have a liability of 143 million (Canadian)
because they have contracted to buy gas at a price much
higher than the current market price. Quarterly they must
'mark to market', but these are unrealized gains/losses-so
that doesn't affect cash. As time passes and settlement is
made cash will be affected---thus the ability to pay
distributions is affected.
The point of this windy rambling is that you must know the
derivatives that your trust has in place to know how safe
your payout is in the future.
US Cellular Calls Exchange Traded
Debt
December 2, 2009
We missed the announcement 10 days ago from US Cellular
that they have called their exchange traded debt (8 3/4%
Senior Notes) (Ticker:UZG). The call is effective
12/24/2009 at the price of $25.00 plus accrued interest
(around 35 cents). These were issued in 11/2002 and thus
have been callable for 2 years. We have 200 shares of this
issue in the High Yield Model Portfolio which were
purchased in March at a price of $19.75. With interest
payments this gives us a gain of about 30% in 9 months.
We will go ahead and let these go to call.
This goes to show that there may be other calls of
undervalued high yielding issues if the issuer is able to go
the credit markets and borrow at a rate less than those paid
on outstanding issues.
Adding Double Eagle Petroleum
Preferred
November 29, 2009 10 PM
We are adding a 5% position of Double Eagle Petroleum
Preferred Shares (Ticker:DBLEP) to our Blended Model
Portfolio.
These preferred shares were highlighted in our email
suggestion from 2 weeks ago--of course we waited a bit
thinking we might get them on 'sale' one day--instead they
are up over 5% since our email.
These shares have a current yield of 9.84% and the shares
go ex-dividend in mid December.
This purchase will bring this portfolio up near 50% invested
and will help us get our end of year return on this portfolio
up over 10% (we hope).
Please go to this page for further links on this security.
A 'Shoe' Drops!!!!
November 26, 2009 4 PM Central
It appears that Dubai World (controlled by the emirate of
Dubai in the United Arab Emirates) is bankrupt.
In our article below from 6 days ago we asked 'what shoe'
was about to drop--now we know. We are highly suspicious
of who knew this in advance and started the heavy
movement into treasury bills.
While we can't totally predict tomorrows reaction---or
whether UAE will step in at the last minute for a bail out--we
can say foreign markets are down 2 to 4 % and the S&P
futures are off 2-3% in the U.S.
The true damage is probably less important that what it may
portend for all the others on the edge of bankruptcy.
We are fortunate to be only 25% invested in our personal
portfolio and in fact hold calls on the SDS (double short S&P
500)---essentially we have no risk in the downside at this
minute. Of course the models are at risk--although not
nearly the risk they would have if they were fully invested.
Expect treasuries to melt UP.
Safety Seekers Out in Force
November 20, 2009
Watching T-Bill yields this week has to make you wonder
what shoe is going to drop soon. While we have seen the 1
month bill trading with yields of 1 basis point quite a lot in
the last year-we have not seen the 3 month bill trading at
that level since last December. Here is a chart of 3 month
treasury yields for the last 2 years.
Obviously there is a dramatic rush to 'safety'. When it
happened in 2008 it happened as the equity markets were
crashing down.
To understand the overall market sentiment you need to
watch the t-bill rates---as we now see a lot of money piling
into instruments that will pay 10 cents a year (annualized)
on a $1000 investment. You have to believe that there are
some serious coming issues in the next couple of months if
you are willing to invest at these rates.
Market Euphoria Continues--Treasury
Bond Yields Plunge
November 16, 2009 11 pm
The melt up in the equity markets continues--seemingly
without an end in sight. It feeds on itself---here again what
are you going to do. We don't buy regular equities
generally so we just sit and watch what we are missing (or
not missing--since we are most happy to sleep well at
nights and collect our dividends and interest).
Interest rates are falling again---seemingly saying 'things
are tough out there'. The talking heads are quite happy not
facing up to the fact that gold is going crazy, the dollar is
falling daily, the federal government is issuing $100 billion
in new debt every month and I am afraid the housing and
employment situation is not even close to improving.
Regardless of the above we are hunting and buying good
income issues (while keeping one eye on the potential
economic surprises out there).
We have updated the High Quality Income Model---and it
has not done nearly as well as the High Yield
Model--gaining only 4.5% year to date. This is mostly a
function of being totally underinvested. On the other hand
we are happy with the portfolio being built and look forward
to better days ahead as the portfolio becomes more fully
invested.
Protective Life Corp.--Solidly in the
Black--a Number of Available Picks
November 16, 2009
Proptective Life Corp., which is a smallish life insurance
company located in Birmingham, Alabama has gotten the
company going back in the right direction--with the write
offs behind it. Like most insurers they had large write
downs last year and hopefully with the economy healing
they will not have those large negatives ahead.
The company has a number of issues available for the
income investor--3 trust preferred issues, 2 exchange
traded debt issues and of course the common shares which
carry a 2.75% yield.
The way we look at the available issues is they are 5 debt
issues and then the common. The 5 issues are all senior to
the common and of course somewhat safer.
The issues are
PLC Capital Trust IV--7 1/4% (Ticker--PL-PA)
PLC Capital Trust V--6 1/8% (Ticker--PL-PB)
PLC Capital Trust III--7 1/2% (Ticker--PL-PS)
Protective Life Capital Securities --7 1/4% (Ticker---PL-PD)
Protective Life 8% Senior Notes (Ticker--PLP)
All of these issues trade with current yields of 8.6 to
8.85%---super yields when they have become increasingly
hard to find. Only the PL-PD issue goes ex-dividend in
December if you are just looking to capture the dividend.
We will be adding a full 10% position (500 Shares) to our
High Quality Model Portfolio of the PL-PD issue today.
Chicken Investing Over--Back to the
Grind
November 11, 2009
We have determined that no one wants to look at the
realities of this dangerous market and the economy so we
just as well go about the business of getting the model
portfolios invested. Needless to say the good odds of a
'double dip' in this economy over the winter makes us quite
nervous.
Note that we have updated the High Yield Model and it has
been performing very well--up over 15% through November
2. We did sell just one item out of that portfolio--and now
will begin to add some more items in. The Blended and the
High Quality Income models remain underinvested and we
hope we will have time to get some more securities in
these in the weeks ahead.
It should be noted that we are staying away from the REIT
common stocks--as we have all year. Certainly there are
some decent companies out in that universe--but we just
don't care to buy the risk. Better to stay with the preferreds
that many of the companies have available.
We will be purchasing mostly exchange traded debt and
trust preferreds (as we have mostly done in the past) as
these are senior to all preferreds that are out there (Trust
Preferreds are preferreds issued by a trust which holds the
debt of the issuing corporation and receives interest from
the corporation which they then pay you as a dividend).
But beyond the above we will be watching this economy
damned closely as the employment situation, fuel prices
and consumer confidence are all negative and we could
easily tip this economy into recession in the months ahead.
Traded Debt to the High Quality Model
NEW
July 28, 2010 6 am
We will be adding Comcast exchange traded debt
(Ticker CCS) to our High Quality Model Portfolio. This
is just yielding 6 5/8%, but the Quality Portfolio target
is 7% so this will fit well. We are comfortable holding
Comcast securities as they are a quality company
and we perceive little risk in this company.
Additionally this adds further diversification to the
model.
This will bring the portfolio up to approximately 65%
invested so we still hold substantial cash , but are
reaching a point where we will gain more monthly
income---we have been very cautious to date and of
course we will remain cautious.
This issue goes ex dividend TODAY--so we may not
add this until the price sets back a bit.
Common Stocks are Dead
Money--Income Issues Perform
Damned Good
July 19, 2010 9 am
I think by now most folks have figured out that
common stocks are dead money (at best) and
owning them at this time is a very risky proposition.
Searching far and wide we don't find many real
reasons to be optimistic over the next 6 months.
Employment and employment outlook remain tepid,
housing fell off a cliff after the expiration of the federal
tax credit on April 30th and consumer confidence,
which had risen into the 60's feel sharply into the low
50's (per the conference board). Of course with the
lousy economy interest rates and fuel prices remain
very low (the silver lining I guess).
So given the poor outlook what is the income investor
to do? You have to stick with quality issues--although
at this point in time most income issues are
performing very well--even the poor quality ones. We
have not changed anything in the model portfolios in
the last month or 2 and they have performed very well.
One issue in particular that has performed well is TC
Pipelines (TCLP) which not only pays a nice 7% yield,
but has garnered a 10% capital gain since our
purchase in January. We hold this in our Blended
Portfolio.
We continue to hold substantial cash, and likely will
over the coming months--although we have some
great issues in sight and likely will deploy some of
our cash in this issues.
The Dangerous Market Conditions
Continue
June 24, 2010 4:30 am
Equity markets have been rather quiet in the last
week event though it has become more and more
evident that the U.S economy is slipping steadily
toward a double dip recession.
Of our 4 key indicators 2 are in serious
trouble--employment and housing. While the
economy can recover without employment growth-we
are more concerned with a worsening of employment
at this point as we watch housing plunge.
Interest rates are falling daily as that market points to
economic softening---even while the Fed is printing
money as fast as it can.
We are personally 50% invested while we have left
the model portfolios as they have been for the last
couple of months. Our personal porfolio is up 4.2%
this year while the S and P 500 is now down
1.8%--and we believe poised to head lower.
We believe at this time that further investing in
preferred shares and debt of anything beyond utilities
is likely not a good idea---and you can be certain that
we are staying away from further investments in
banking issues.
Knocked Offline for 4 Days
June 14, 2010 10 am
We hate it when it happens --but we can always be
sure that when you live in a somewhat rural area you
will have technical issues that knock you off the
internet. Last week we hit one of those times--but
now hopefully are back online and can give some
updates.
This Coming Week WILL Be a Tough
One
June 6, 2010 11:30 pm
Whoa is me. We are relatively certain this will be a
really tough week in the equity markets---why?
Europe is a mess--employment gains are non
existent--and housing sales are absolutely
plummeting. Forget the 'talking heads' that are
telling you anything good on the housing and
employment situation--they are either stupid or just
plain lying!!!!
We will be changing our investments assumptions
before the end of June--and while we wish they would
present an optimistic viewpoint we are afraid they will
be more on the 'double dip' side of things.
For now a person needs to 'batten down the
hatches'--meaning stick with the real quality issues.
Stay away from banks and other financials---make no
further commitments to the energy sector (royalty
trusts etc) and wait and see what develops. It is
critical to 'preserve capital'--there will be a time and a
place to pick up bargains in the weeks ahead--but
you need your capital to take advantage of these
opportunities.
One More Exciting Day Ahead - Then a
Rest
May 20, 2010 11PM CDT
OK - it has been a tough week for investors in
equities--we are fortunate to have very little common
stocks, oil trusts or master limited partnerships in
either the models or in personal accounts.
In the models Provident Energy (PVX), TC Pipelines
(TCLP), Pfizer (PFE) were 'bloodied' quite a lot---but
the other dozen or 2 holdings in models and personal
accounts held up quite well. The S and P 500 is off
near 6% this week so far while our accounts are off
1.5-3%---it was also helpful to have been carrying a
lot of 'cash' in the accounts.
We have not looked at everything we own closely, but
we have noted that a number of our 'small company'
preferred have done perfectly. They are very
boring--just like we like them. These issues were SY
Bancorp Preferred (SYBTP) Sterling Bancorp
Preferred (STL-PA) and Willis Lease Finance
Preferred (WLFCP)---these have barely moved all
week---just perfect.
At this time, while we see what look like
'bargains'--we can't be a purchaser of anything. We
expect a bounce sometime soon, but we don't truly
see stable equity markets for months.
High Quality Portfolio to Sell Credit
Suisse Notes
May 19, 2010 8 PM CDT
We have held Credit Suisse 7.9% Exchange Traded
Debt (Ticker:CRP) in High Quality Model portfolio
since September, 2009.
Credit Suisse is a highly respected Swiss investment
firm which we hold in fairly high reqard and at 7.9%
we anticipated holding this security until it was called
sometime after 2013.
Unfortunately with the upheaval in Europe it is most
prudent to sell this before it gets 'hit'. At this point it is
holding up and we will break even on the sale--but
anything could happen in the days and weeks ahead
and given that this is our 'high quality' model it is best
to exit at this time.
We Have Finally Let Windstream (WIN)
Go
May 11, 2010 10 PM
Way back on April 4th we stated we may sell our
Windstream shares in the Blended Income Portfolio -- well
finally we have done so today at a price of $10.70.
In general we have always had concerns with some of the
telecoms because they are losing land lines and replacing
them with other services--cable tv etc for a near break
even net revenue. They all carry very high levels of debt
and they all pay very good dividends.
Windstream missed their expected earnings for the quarter
recently ended and we believe that earnings may trend
down from here. Given that we have a large capital gain
on the shares, which we have held for 8 months, we just
decided to unload the shares.
A Strong EU Response Brings a
Strong Market Response
May 10, 2010 9 pm CDT
A massive strike by the EU at Euro bears dealt them a
knockout blow---for the time being. From our perspective
the stability that this will bring to the marketplace will make
our jobs as investors much easier. Likely that the major
European Banks are now backstopped just as the major
U.S. banks were last year.
Below we mention a number of issues on our 'watch
list'--we will now be watching carefully as we may just
snag a few of these issues (or issues very similar). These
would be small, well diversified purchases.
We believe that the equity markets will continue some level
of gyrations in the weeks and months ahead, but should
generally remain flat. The higher quality income issues
should remain stable in the weeks ahead as well.
Our economic assumptions remain the same as outlined in
articles below--although we could see a slight slowing in
economic growth as ramifications of tighter credit
standards grip the world.
A Few Issues for Your Watch List
May 9, 2010 8 PM CDT
While the markets are in turmoil we may see some
opportunities come from the turmoil.
These issues may become more attractive in the
weeks ahead, but a person must do due diligence
and understand the tremendous risk that may come
with long term income opportunities. This is not a
recommendation to buy any security--just some
issues we have our eye on.
GFW AAG Holding 7 1/2% Debentures
Current Price 22.02 Current Yield 8.52%
INZ ING Perpetual Debt Securities
Curent Price 18.05 Current Yield 9.97%
AEF Aegon NV 7 1/4% Perpetual Capital
Current Price 19.15 Current Yield 9.46%
DTK Deutsche Bank Trust Preferred 7.6%
Current Price 22.81 Current Yield 8.33%
Each of these issues traded as much as 20% lower
than their Friday close--with corresponding higher
yields.
Some of these issues (as well as many others) may
trade MUCH lower in the days and weeks ahead as
they will be tremendously affected by the European
situation.
We are watching these as they may trade so low that
they become raging buys---and then again if the EU
collasped so could these issues.
We Have Bought Xcel Energy Debt
May 7, 2010 9:45 am CDT
Even though we had planned to not buy until at least
Monday (see below) we saw Xcel Energy Debt (XCJ) fall
over $1.00 so we went ahead and moved in for a buy. This
gives us a yield of near 8% on a very good issue--and right
now utilities are where we feel safest.
Foreign Markets Tumble--Regain
Footing. U.S. Futures Pointing Higher
May 6, 2010 11:30 am CDT
With the employment report tomorrow and the situations
from today carrying over most anything can happen on
Friday. Futures on equities are up strongly tonight--and
foreign markets are getting their footing, at somewhat lower
levels, we would expect a very choppy day on Friday.
We believe that long term income investors should not
overreact. If one has quality preferreds and debt issues
that took a hit they likely will bounce back nicely in the next
week or two. If you hold Santander, Barclays, RBS,
Deutsch Bank or ING preferreds you likely have been
bashed. In this case how much pain can you take? It is
likely that these will be OK--but at this moment who knows
really. Note that we hold none of these issues either
personally or in the models. Notice to the right in the
column from March 8 that the RBS issue which was in one
of the Models was sold--we didn't trust the British
government--or any European government for that matter.
We will be looking for bargains tomorrow, but likely won't
buy anything until at least mid-day on Monday. We will be
looking at non-financial preferreds--for instance BG and E
preferreds, Empire District Electric and Xcel Energy debt
issues , US Cellular Debt and other safe issues which may
go on sale.
Hi Volume/Hi Volatility Traders Damn
Near Crater Markets--While Mom and
Pop Get Slaughtered
May 6, 2010 5 pm CDT
Updated May 6, 2010 6 pm CDT
Some of us are trying to 'invest' while Wall Street trading
firms, hedge funds etc are doing their best to totally muck
up the markets -- creating markets that are damned scary
for mom and dad. We have lived through the crash of 1987
and other crashes and yet were still amazed to watch the
Dow drop by 4-500 points in the matter of minutes--basis no
real new news. No matter the cause of todays plunge you
can bet there are fewer investors for the markets tonight
than there was early today--folks are getting more than a bit
tired of getting screwed by these greedy bastards.
Unfortunately these actions will likely hurt even us
'investors' as the regulators will move in and legislate laws
which go way over the top.
The Model Holdings
While the model holdings had held up well during the recent
downturn some of the issues finally got nailed today. In the
High Yield Model Otelco (OTT) was off around 10%
--Selective Insurance Exchange Traded Debt (SGZ) was off
6-7%. We think that SGZ likely is giving us a 'sale' price.
Provident Energy (PVX) is also off sharply as oil has
tumbled hard. The good part is the total portfolio is only
35% invested so we have dry powder when some items go
on 'sale'.
In our Blended Income Model TC Pipelines (TCLP) has
gotten creamed although their income is only very
modestly tied to oil and gas prices. Also Windstream (WIN)
got smacked and honestly we had meant to sell this holding
as we believe forward earnings will be weak.
Opportunity Ahead
Below we mentioned Banco Santander, Deutsch Bank and
Barclays Preferred shares as 'dangerous'--but in fact they
are just dangerous today and tomorrow--it is likely they will
present tremendous opportunity in the near future.
Additionally everyone should have plenty of cash in their
portfolio (at least in our models and real money accounts
have had more than 50% cash for almost 2 years)--and it is
at times of distress that we can pick up some bargains.
This link gives you all closing prices each day for all
Preferred shares and Exchange Traded Debt shares on all
exchanges. This is a great resource to skim each day to
see what has gone 'on sale'. Of course a person needs to
do more due diligence--but it is a great starting point. We
see a number of issues that we will be watching in the days
and weeks ahead for buying opportunities.
The Beatings Continue--Some Issues
to Watch
May 6, 2010 12:30 pm CDT
Well the beatings continue today and even we are feeling
some pain. The Greek parliament passed their austerity
measure (what choice did they have?), but this by itself is
meaningless as the other EU countries have to pass it and
then it has to be implemented.
Today anyone that holds debt or preferred shares of
Deutsch Bank or Banco Santander should be out of those
holdings. They have been beat up quite a bit already--but if
there is another glitch in Europe you could see these
issues fall 20 or 30% (or hell even 50%) in a replay of what
happened in the U.S. in 2008. I think that maybe even
Barclays Bank holdings should be unloaded. Both Deutsch
Bank and Barclays have tons of preferred issues out there.
While it is wise to be out of these issues now it may present
a wonderful opportunity in the future. In early 2009 we
bought many preferreds at huge discounts and doubled our
money on them--but that time is not now.
Markets Stabilize---For the Time Being
May 5, 2010 11 am CDT
After falling off a cliff early this morning the equity markets
have stabilized and moved a bit higher. Treasury Yields
(on the 10 Year) hit a low in the 3.5% area and since have
bounced to 3.56%.
We think it is fair to say that the Greece, Portugal, Spain
etc., situation will be with us for weeks to come and the
income investor has to--as always--check their portfolio at
least once per day.
The employment report later this week, which is expected
to be positive--but only mildly so, and the need for Germany
to approve the Greece bailout package by the weekend
both have the ability to send the markets into a tail spin if
there are any surprises.
Of course there are some positive out their--the turmoil has
lowered oil prices which should translate to a little relief at
the pump. Additionally the Canadian Royalty Trusts have
set back a bit and Provident Energy (PVX), Pengrowth
(PGH) and Penn West Energy (PWE) are all worth looking at
with yields in the 8-10% area.
Equities Pounded--Treasury Yields
Continue Plunge
May 4, 2010
It has been an exciting time in the last week as
most of the economic stats domestically that we
were expecting have come to fruition--essentially
slow recovery. Of course we were not expecting the
European sovereign debt issue to get this far out of control
which has resulted in plunging Treasury Yields as
investors race for safety (although you have to wonder
about the future safety of this move).
We are fortunate in that almost all of our investments--in
particular preferred stocks and exchange traded debt
remain fairly solid, while some of the master limited
partnerships, common shares closed end funds have
gotten hit a bit harder--but generally we are well satisfied
with our portfolio performance through these uncertain
times.
As you have may have noted we have not sent any
'highlighted' security emails out for a few weeks as we are
waiting for the marketplace to settle down before moving
forward with further investments (personally and in the
models).
The balance of the week will be exciting in that we have the
monthly employment on Friday and between now and the
weekend we have the EU dealing with (approving?) the
Greece bailout. We are skeptical about the strength of
employment and generally think the report will indicate job
growth--but not very strong growth. We are ok with this for
now as it would dovetail with our forecast.
We think an income investor should mainly sit tight at this
stage--holding some cash to be deployed when the current
turmoil gets ironed out.
Wild Ride with the Greece 'Situation"
April 27, 2010
With the downgrades of Greece and Portugal debt today
markets around the world tumbled and in spite of a poorly
received treasury auction yields fell as a 'flight to safety'
took place.
It is nice to have the equity markets tumble as they were in
need of a breather from the never ending move upward.
Additionally this gave us an opportunity to add some
shares to our 'High Quality Model Portfolio". We have
added 500 shares of Sterling Bancorp Trust Preferred
Shares (Ticker STL-PA) at $10.00 per share. This was one
of our recently highlighted issues which can be seen here.
Please note that this issue is callable at $10.00 (plus
accrued interest) at any time. We continue to try to get
some safe holdings in our underinvested portfolio and we
think this is a good holding with a current yield of 8.38%.
CNBC BS on Trust Preferred Shares
April 22, 2010
This morning I just happened to have CNBC on for a
moment and was unfortunate enough to see Cassandra
Toroian who is President of Bell Rock Capital (whoever the
hell that is) say that you should sell your Trust
Preferreds--because they are essentially bonds----well at
least she got that part right.
We have studied the relationship between interest rates in
general and the pricing of Trust Preferreds and of course
there is a relationship---but within a given range the affect
that rising rates will have on the shares is minimal. We
looked at some higher quality issues--such as the Trust
Preferreds from JP Morgan and found that if interest rates
(as measured by the 10 year treasury) rose by 1/2% the
price of the Trust Preferred would move down by 3-5%.
Hardly a major disaster.
I think we can agree that rates in the next year are likely to
move higher---but when that is and by how much is an
unknown. If they were to move up 1% or more quickly there
would be damage to Trust Preferreds--but to move up 1/2%
over the course of 6 months is an entirely different story.
Of course very long term holders--buying for income have
many different motivations than those on Wall Street which
would like you buying and selling every day.
We are holding any Trust Preferreds that we own either
personally or in the model portfolios. When the time comes
to sell these issues it will be when rates are above 4% for
sure---and likely at some point above 4.25% (on the 10
year). Tossing these out at this point is pure silliness.
Equity Markets Tumble on Goldman
Charges
April 16, 2010
Well today the SEC charged Goldman Sachs with civil
fraud--gee wiz--what a surprise. We likely already knew
that Goldman was playing both sides of mortgage security
deals--but this may get to the bottom of the story. Also
charged was a Goldman vice president (a ripe old age of
31)---they should charge Goldman with stupidity for allowing
31 year olds to screw around with important stuff. Of
course it is this kind of crap that has us investing only in
'income' securities.
Bond yields tumbled today on a weak University of
Michigan consumer sentiment report--10 year treasuries
have fallen to a yield of 3.78% after going over 4% just a
couple of weeks ago. Consumer confidence is the 1 trend
we just can't seem to keep going in the right direction---1
month it's up and the next month it is down. The next
employment report has to be good or rates are going to fall
further and we will again question the 'double dip'.
For this minute we remain constructive with our view
remaining slowly improving economic condition as most
indicators (and profit reports) remain positive. We expect
that we will remain this way until the next employment
report and then we will re-evaluate.
Well the Numbers Are In -- Now What?
April 4, 2010
Well the economic numbers came in for the week
and we think these, by and large, verified our
beliefs--a very slow improvement overall and with
it an upward bias in interest rates.
We think that since the most important
number--employment--showed some job growth--although
modest, that equity markets will maintain their 'Goldilocks'
path--drifting upward. We are just hopeful that interest
rates, as they rise will not go higher too quickly--a drift up
will give us time to adjust to the higher rates as they go up.
Next we are moving into earnings season (for the quarter
end 3/31) and again we believe earnings will prove
adequate--and things will move slowly forward.
Our worries remain a possible double dip since housing in
particular looks very weak (and with interest rates moving
higher not likely to improve). Also potential 'debt bombs'
are all over the world--just waiting to explode and we worry
about these.
For now we remain conservatively invested--with plenty of
cash in the accounts---looking for solid and safe yields.
Maybe the Most Important Week Yet
this Year
March 28, 2010
Through the first 3 months of 2010 we have had all kinds of
economic information---some of it good--some of it
bad--some of it just downright confusing.
It is our opinion that the economic news to be released this
week will give us a damn good idea of whether we are still
on the gradual recovery path OR whether we are staring a
double dip recession straight in the eye.
First off this week we have Personal Income and
Spending---we have no idea where these will come in, but
we believe they need to show at least flat income and
hopefully at least a small tick up in spending.
On Tuesday we have retail sales as defined by the
Redbook Survey, the Case Shiller Home Price Index and
the Conference Board Consumer Confidence Index.
Wednesday we have the Mortgage Bankers Purchase
Applications, Chicago Purchase Managers Index, and
Factory Orders.
Thursday we have Jobless Claims, Construction Spending,
Institute of Supply Management Manufacturing Index,
Construction Spending and Vehicle Sales.
Lastly on Friday we have the March Employment Report.
These reports cover all of our key areas that we watch to
get a real read on the economy. In general we need most of
these reports to be at least ok (not major surprises to
expectations) and in particular we need Consumer
Confidence to move up from the last report and we need to
see a positive surprise beyond census hiring in the
employment report.
Our sense is that almost regardless of the stats this week
the equity markets are going to correct here (which means
little to us) and it appears that treasury yields have seen
their lows for the year as they seem to be in a march
upward. We are concerned about rates it they spike too
high, too fast. If they move up slowly (a few basis points a
week) we are not concerned---any more major upmoves
likes last weeks 1 day move of 15 basis points we will
become much more concerned.
For this very moment we don't see any change in our
strategy and will add quality items if we find them.
Our Current Economic Assumptions
Added 3/23/2010
We thought we should add a 'blurb' on our interest rate
outlook. It is simply our belief that rates will climb
gradually throughout the year. By this we mean that the 10
Year Treasury will move up from a current rate of 3.68% to
near the 4.25% rate by year end. Up to the point the huge
demands of the government to finance its deficit has not
had a great affect on rates--we assume that this will
continue as the recovery will be weak enough that
demands for money from the private sector will remain
modest.
March 22, 2010
As a prelude to any investment one (anyone) must have a
belief in certain assumptions about the future of the
economy in general. We thought we should go through
where we believe we are headed in the U.S. economy.
We have previously listed the 3 key items we believe are
critical to the resurgence of the general economic health of
the country. Our view is the most important item we need
to see improve to feel secure in the future is consumer
confidence. Of course consumer confidence is derived,
generally, from the state of many items---items such as
cost/price increases (PPI/CPI), the level of interest rates,
the price of fuel (or commodity prices in general), the level
of employment---and the current and future outlook for each
of these items. Our 2nd most important item and really a
part of confidence in employment--we believe this is
obvious. 3rdly we believe that fuel prices--mainly at the
gasoline and diesel pump (the most visible to mom and
pop) are a key factor. Now we add a 4th item to our 'key
factors'--Housing. By 'housing' we mean the whole ball of
wax---values, housing starts, sales, foreclosures etc.
Our outlook is as follows--
We believe that the unemployment rate will improve over
the course of the rest of the year. The current rate is
9.7%--and we see a drop toward 9% by years end. We
understand that there is huge noise in these statistics with
all the extended benefits out there and this being a census
year with the concurrent extra hiring. We believe that
consumer confidence drives from the 'headline' rate and not
the underlying detail.
We see the price of a barrel of oil trading at a price no lower
than $75 and possibly as high as $100. Thus we see
gasoline at the pump of from a low of $2.49 to as high as
$3.49 (these are Minnesota prices).
Relative to housing we see a little postive change, but not
much---somewhat soft sales, stabilized values, very modest
new construction (and then of mostly modest houses) and
continued foreclosures----overall a slight positive change.
Higher mortgage rates will hinder anything beyond modest
improvement.
Lastly we see consumer confidence as measured by the
Conference Board (current conditions) as starting to
improve beginning with the report of March 30th and slowly
climbing toward 65 by the end of the year. Note that the
measurement plunged by 10.5 points with the last report.
Below is a chart through the last report.
Now we realize that we may have to revise our economic
outlook beginning as soon as tomorrow or the next day---but
if we didn't have an outlook that was mildly positive we
would just crawl in a hole and forget about investing---put
the money in CD's at 1% (or whatever measly rate).
Our outlook tells us to continue to carefully invest--pretty
much 'steady as she goes'. Continue to weed out shares
that become severely overvalued and those that appear to
have become riskier than our situation allows us to hold.
This means we will continue to likely hold fairly high levels
of cash (say 20-40%) in our models and in our personal
accounts. This puts our investment goals at risk as cash
pays so little--but we would rather miss our goal than toss
money away.
Junk Stuff Sprints Ahead--Much
Faster Than the Quality Stuff
March 14, 2010
We have been very cautious of late (of course we
are always chickens) and have weeded out some
of the 'crap' from the 'High Yield Model Portfolio'--only to
watch those issued march ahead (Stonemor Ticker:STON in
particular). Here is a chart of the gains on Stonemor (which
we consider a true 'high yield' issue (read--high risk). We
are relatively certain that Stonemor will get beat up in the
near future as they release earnings this coming Monday
and the odds that they will disappoint have become pretty
high with the units trading at this high level.
We also sold some Royal Bank of Scotland Preferred
(RBS-PG) which is a very low grade preferred--as
evidenced by its $13.00 share price.
In the last few months we added Otelco (OTT) which is a
high yield telecom that had a 12% yield--now the share
price has sprinted ahead 20% (and of course the current
yield has dropped). Recently we purchased Red Lion
Hotels Trust Preferred (RLH-PA) for the over 10% yield--and
now it has moved ahead in the last week---we would have
been quite happy with just the yield--and once they race
ahead 10-20% in a short period of time we question whether
we should just take the capital gain and exit the position (of
course this is a good position to be in). Given that we think
the 'high yield' sector has gotten so far ahead of its self I
guess something with a relatively quick 20% gain should
just be sold and repurchased if it sets back.
Speaking of chasing yield---Citigroup came with a huge
Trust Preferred offering which was oversubscribed and it
comes to the market 1/4 to 3/8% less than expected.
Nevermind that they are government controlled---and
remain a low quality issue.
The 1 month treasury bill which had a yield of just 1 basis
point as recently as 6 weeks ago is now yielding 10 basis
points. As fear is introduced into the marketplace rates go
very low--as investors become complacent and chase risk
(yield) these yields rise .
It is becoming obvious to us that investors are really
stretching for yields--no not to the point where we see a
market collapse--YET, but as time goes by there is no doubt
that interest rates are going to streak higher--the only
question is when?
And it is our opinion that if you listen to any of the large
Wall Street houses (Goldman, Morgan Stanley etc.)--and
don't form your own logical opinion you are being lead
down the path to slaughter. They want you all in the
markets as quickly as possible--you can bet that they are
making bets directly against many of the investments that
you are making---if it is legal (forget about morally
justifiable) Goldman is doing it.
Adding to the High Quality Model
Portfolio
March 8, 2010
We are adding shares of SY Bancorp Trust Preferred to our
High Quality Model Portfolio. These shares have a current
yield of 8.8%---and in our view are top notch qualiy. The
company has not lost money in the last 4 years and recent
results are great in this environment.
This selection went out in our email highlight to subscribers
during the last 8 days (and volume spiked way above
average) and the pricing of the issue remains attractive at
this time.
Check it out here--SY Bancorp Trust Preferred.
If you are 100% Invested You Are
Asking For Trouble
March 2, 2010
We have kept our personal portfolio and all of the
model portfolios in the 30 to 60% invested range for
the last 3 months specifically because we remain
cautious as we have not been able to figure out if
the next economic cycle is another recession--a
depression or a recovery. While we need to be
further invested to make our goals---the first
priority is capital conservation.
Only 2 weeks ago the Fed raised the discount
rate--primarily as a 'shot across the bow' signaling
that rates won't remain low forever. Then
yesterday the Obama administration begins to tone
down expectations for the employment numbers to
be released later in the week. One month
consumer confidences goes up--the next month it
plunges
Then we have the sovereign debt situation -- in
Greece ---and really everywhere. In the case of
Greece Goldman Sachs gave help to the
governmental 'cooking of the books' (what won't they
do if it is legal and they can make a buck?).
The U.S just continues down the road of one stimulus
package after another. We had cash for clunkers and now
we may have a new program for home energy efficiency -
on top of various tax credits we already have available.
Unemployment compensation extensions just never seem
to end and new debt is issued every week which equals our
total annual deficit from just a few years ago.
Now with all that being said we are simply positioned in
such a way that we can exit the market quickly if it is
required----and because a major market moving event could
come quickly it is most important that one preserve their
capital (in our case by letting half of it rest at paltry money
market rates).
Time For More Extreme Caution
February 18, 2010
Well the Fed hiked the discount rate today in a move that
they had telegraphed was coming, but the after market
hours move put the futures market in a tailspin. While this
doesn't really mean much in the short term to the general
public it does send the message that extremely low rates
will not last forever---this could send the various markets
into a tail spin for a day or 2 it likely will blow over
relatively quick.
This is just one more reason that we have kept our
personal portfolio relatively liquid and have not rushed to
get the models fully invested (although we make some
changes below)--there are too many uncertainties out there
and the employment market doesn't really seem to be
improving much, if any.
Some Changes to the Model Portfolio
We will make the following changes to the model portfolios
early next week.
To the Blended Income Portfolio
We will add 400 shares of Red Lion Hotels Capital Trust
(Ticker--RLH-PA). This is a 10% yield issue----we
highlighted this issue in our last email note.
Additionally we will sell calls against our 500 shares of
Ship Finance (SFL). Selling the May $15.00 strike has a
potential to add 1-2% per month to our return on this issue.
Remember that selling covered calls is considered more
conservative than simply owning the common
stock---assuming you plan to hold the stock indefinitely.
To the High Yield Income Model Portfolio we will add the
same Red Lion Capital Trust--400 shares. With the 10%
current yield the issue fits both of these portolios quite well
and we feel that Red Lion is a well manages corporation
and as safe as possible in this environment.
Whats Next???
February 7, 2010
After a week in which the S & P 500 index fell as
much as 5% from the weekly high to the weekly
low--and ended up down 2% on the week what is
next, for us, the income investor?
We have reviewed the model portfolios and are
considering whether it is time to unload energy
related common shares (Provident Energy-PVX and TC
Pipelines-TCLP). We think it is likely that we will keep
TCLP and sell the PVX in which we have a rather large
gain. Energy prices continue their move down and the
continued weakness in the employment marketplace
indicates that demand is going to remain weak. Given that
the models remain underweighted in equities we don't see
urgency in making further changes at this time. The
models and the personal portfolios took only minor damage
last week--and unless we see further fiscal turmoil in the
European economies we don't expect too much further
weakness in our issues.
As we are searching for new investments we likely will
only make commitments in the near future to high quality
issues---as the lower quality issues will get hit if we are
wrong on economic stability and we start to double dip the
economy.
Interest rates which had traded in a 15-20 basis point range
the last month or 2 fell out of the range with the
announcement of the poor employment numbers. We think
they likely will creep back up this week (unless we get
more panic in Europe and a big flight to safety takes
place)--but it looks like we are months away from what we
think will be a 1/2% (or more) rise in rates. Of course this
thought could change if we escalate trade fights with the
Chinese and they stay away from our treasury auctions.
Third Leg to Recovery Not Likely to
Appear Soon
Employment isn't going to improve anytime soon
February 4, 2010 Noon
With the equity markets in somewhat of a freefall
today and treasury yields plunging because of
lackluster employment prospects and sovereign
debt issues around the world we would be quite
surprised to see a recovery of any magnitude in the
U.S. anytime soon.
We have reviewed the model portfolios (as well as
our personal portfolio) and are well satisfied that
we will generally weather the current storm in fine
fashion. While we haven't calculated the model
portfolio damage--we have calculated our personal
portfolio and our losses are a tiny fraction of the
general equity market losses (1/4 of 1% loss
versus over 2% on the S & P 500 loss).
At this time and with the current uncertainties one
should be reviewing their income issues and considering
weeding out some of the lower quality issues---if we should
double dip this recession the weak issues will be at high
risk for loss of payouts.
We are maintaining fairly high levels of cash in all
portfolios as there is no rush to invest---there are always
bargains coming available.
Still a Slowly Improving Economy???
January 26, 2010
With the Conference Boards Consumer Confidence
numbers we have now fulfilled 2 of our 3 legs that
we need for a real recovery. Consumer
Confidence is not moving hugely higher but instead
is just moving gradually--which we prefer for a
lasting recovery.
Prices of fuel, and in particular gasoline, are
moving a bit lower (although we need this to be
only slightly lower--just not dramatically higher--not
higher than around 2.70 on gasoline).
Our third leg is employment--the most important and
likely the most difficult to get moving in the right directly.
The next employment data is released on February 5, 2010.
Our view is that this will be a somewhat neutral number --
we are not personally seeing anecdotal evidence of
employment
We get the feeling that this is going to be a very gradual
recovery. With 1 month Treasury Bills trading at 1 basis
point it is obvious that there is still a lot of fear out there
and the possibility of a 'double dip' is still looked at as a
possibility--in fact it is personally our greatest worry
Our best guess is that the equity markets will essentially
go no where in the next month and income issues that we
invest in will remain stable.
We continue to stay away from most REITs and the
Shipping and Transportation issues (excepting select REIT
preferred issues) as they do not fulfill the goal of giving us
decent 'income' at this time. The biggest hazard to equity
markets right now is the Obama Administration which is
continually beating on the marketplace as it is the populist
thing to do.
Dow and S & P Get Smacked--Income
Issues hold Up Well
January 22, 2010
Finally with the big smackdown of Thursday on the Dow and
S & P stocks we can see the good results of holding a
decently diversified income portfolio. With the Dow off 2%
and the S & P 500 off 1.9%, in general, our models and
personal portfolios were off much less than 1%. These are
the types of results we have looked for--a preservation of
capital with decent income on the portfolios. Our
expectations are that when the equity markets are down we
will see much smaller directional moves in our portfolios.
As you may have noted we quit covering REITS more than a
year ago simply because with the exception of selected
Preferred issues (as well as some of the healthcare REITS)
the REITS are very dangerous. Just glancing over the
Commercial/Industrial REIT Sector we noticed that on
average they were off 4% on Thursday--twice the Dow loss.
There really is no improvement in sight for many REIT
areas and we believe that before improvement comes there
is much more pain to be had by some of the companies.
Use extreme care around the REITS.
Time to Let Supertel Preferred Go
January 16, 2010
We have held 400 SuperTel Hospitality Preferred shares
(Ticker:SPPRP) in our Blended Income Model Portfolio
since 3/18/2009 and they have paid us an annualized yield
of over 10% (based upon our $6.44/share purchase
price)---but at this time we think it is time to sell these out of
the model. We have a decent capital gain on the shares
and it is seldom wrong to take a profit.
The issue is this---like most Hotel/Motel REITS SuperTels
(Ticker: SPPR) profits have been poor over the last
year----Funds From Operations (FFO) remains very
modestly positive. Obviously they are paying no dividend
on the common shares--which conserves cash--and they
sold 2 more properties in October, 2009 which again will
help generate some cash. Even with these measures It is
our belief that the hotel/motel business is only marginally
improving and if a REIT needs to conserve more cash they
will turn to a suspension of any preferred stock dividends
they are paying. The December quarter is a slow quarter
for SuperTel and depending on results they could look at
suspending the preferred payout.
Quite simply---we had counted on an improvement in the
sector by this time and not seeing that happening we are
happy to take our profits and search elsewhere.
It is our belief that any dividend suspension would send the
share price from the current $8.25 to around $2.00.
Model Portfolio Additions
January 5, 2010
Today we have added a few issues to our model portfolio.
1st we have added almost a 7% position in TC Pipelines
(Ticker:TCLP) to our Blended Income Model Portfolio. This
is a Master Limited Partnership which was the subject of an
email we sent out a few weeks ago--you can read our info
here.
2nd we are adding BGE 6.2% Capital Trust Preferred
(BGE-PB) to our High Quality Model Portfolio --we will add
almost a 6% position. This issue has a current yield of just
under 7% and at around $22/Share we think it has a good
5% of upside on the capital gain side in the next year--which
would give a total return of 12%--way above our 7.5% goal
for this portfolio. You can check out BGE (Baltimore Gas
and Electric--a unit of Constellation Energy) here.
Watch Your Bond Funds
December 29, 2009
As we get close to closing out 2009 and are looking at
interest rates that have now moved up near 1/2% in the last
couple of weeks you need to review your portfolio with
particular emphasis on high yield bond funds.
Through the course of the year high yield funds have had
dramatic returns--we have held a number of funds off and
on and the capital gains have been hugely helpful to our
portfolios. Currently we hold the Pimco High Income Fund
(PHK) in our Blended Income Model Portfolio as well as in
our personal portfolio and have more than doubled our
investment. These high yield funds ARE leveraged funds
and could give back a fair portion of their share price gains
in the next 6 months if interest rates rise. While the yields
are good we plan to sell these from our portfolio this week
and not give back any gains on these issues.
OTELCO Goes on Sale
December 17, 2009--Noon CST
Earlier this week we sent out an email note to those signed
up to receive it on a little Telecom company named
OTELCO (Ticker:OTT). Today the general market selloff has
presented an opportunity for us to pick up some of this
issue for our personal account and for our HIGH YIELD
MODEL PORTFOLIO at sale prices. The issue started the
week in the $14.50 range and now has traded down to
$13.80, as we write this, on some large block sales. The
current yield is over 12%.
Check the company out here.
Seemingly Closer to Recovery?
December 10, 2009
We have said in this column for a number of years that the
recovery of the U.S. economy is predicated by 3
items---consumer confidence, fuel prices and employment
Of course a large part of confidence is driven by
employment and fuel prices (for transportation and for
heat).It appears that employment is healing (if you believe
the numbers) and in recent days energy prices have
moderated (although nat gas has moved up some--the one
we see day in and day out is 'at the pump')---so we need the
confidence part to get to the positive side of things.
As this chart shows (from 'The Conference Board")
confidence has been relatively flat the last couple of
months and we believe that we are due for a move
up with the next reading (around 12/23) simply
because of the lowering of the unemployment rate
and the declining price of fuel at the pump. These
types of data tend to 'feed' on each other and we think
that is the case here.
What does it mean outside of things are getting a little
better? We think it means very little
at this point in time--we think stocks are going nowhere
over the next 6 months as they have gotten ahead of
themselves. We think interest rates are going nowhere
over the next month, but may move higher in the next 60-90
days in reaction to perceived economic strength.
PLEASE NOTE that 1and 3 month treasury bill rates remain
at extremely low rates meaning that there is a lot of money
willing to accept a negative (inflation adjusted) return to
keep their money safe. Quite a few people are NOT willing
to believe that things are getting better.
Caution Needed on Royalty Trusts and
Limited Partnerships
December 7, 2009
We spent time this weekend reading some quarterly reports
which reminded us of the particular care that must be
taken when purchasing Canadian and US Royalty Trusts or
Master Limited Partnerships.
We all know that the companies of the sectors mentioned
generally explore for and produce oil and natural gas. Of
course they forward sell much of their production when
prices spike up which helps maintain their generous
distributions to holders of their securities. With these
hedges there are benefits and in some cases there are high
risks. Some of the companies simply explore for and
produce natural resources---others explore for, produce and
transport natural resources. Others explore for, produce
and process products---and this may included purchasing
product from others and this can produce large future cash
liabilities--which are a hazard to the distribution.
For Instance take Paramount Energy--a Canadian Royalty
Trust--mainly focusing on natural gas. Over 50% of their
stated revenue is hedging income from forward sales or
financial hedges of gas (actual price for the quarter was
$3.41/mcfe (Canadian Dollars) while the realized price with
hedging was $7.51). If we are to assume that natural gas
prices stay low---over time-- the company will not have the
financial hedges in place to replace the revenue--and thus
the payouts will have to be reduced further (the current
yield is 12.5%).
These companies are not foolish---when prices go way up
they forward sell their production---but not all their
production and only forward for a year or 2 at most---so
while they are able to maintain payouts for some amount if
time it is a future risk.
Now if you look at Provident Energy Trust (which we have
held, but are considering selling) which has a midstream
business it is a different story. The midstream business
purchases natural gas on a forward basis from others -- and
currently they have a liability of 143 million (Canadian)
because they have contracted to buy gas at a price much
higher than the current market price. Quarterly they must
'mark to market', but these are unrealized gains/losses-so
that doesn't affect cash. As time passes and settlement is
made cash will be affected---thus the ability to pay
distributions is affected.
The point of this windy rambling is that you must know the
derivatives that your trust has in place to know how safe
your payout is in the future.
US Cellular Calls Exchange Traded
Debt
December 2, 2009
We missed the announcement 10 days ago from US Cellular
that they have called their exchange traded debt (8 3/4%
Senior Notes) (Ticker:UZG). The call is effective
12/24/2009 at the price of $25.00 plus accrued interest
(around 35 cents). These were issued in 11/2002 and thus
have been callable for 2 years. We have 200 shares of this
issue in the High Yield Model Portfolio which were
purchased in March at a price of $19.75. With interest
payments this gives us a gain of about 30% in 9 months.
We will go ahead and let these go to call.
This goes to show that there may be other calls of
undervalued high yielding issues if the issuer is able to go
the credit markets and borrow at a rate less than those paid
on outstanding issues.
Adding Double Eagle Petroleum
Preferred
November 29, 2009 10 PM
We are adding a 5% position of Double Eagle Petroleum
Preferred Shares (Ticker:DBLEP) to our Blended Model
Portfolio.
These preferred shares were highlighted in our email
suggestion from 2 weeks ago--of course we waited a bit
thinking we might get them on 'sale' one day--instead they
are up over 5% since our email.
These shares have a current yield of 9.84% and the shares
go ex-dividend in mid December.
This purchase will bring this portfolio up near 50% invested
and will help us get our end of year return on this portfolio
up over 10% (we hope).
Please go to this page for further links on this security.
A 'Shoe' Drops!!!!
November 26, 2009 4 PM Central
It appears that Dubai World (controlled by the emirate of
Dubai in the United Arab Emirates) is bankrupt.
In our article below from 6 days ago we asked 'what shoe'
was about to drop--now we know. We are highly suspicious
of who knew this in advance and started the heavy
movement into treasury bills.
While we can't totally predict tomorrows reaction---or
whether UAE will step in at the last minute for a bail out--we
can say foreign markets are down 2 to 4 % and the S&P
futures are off 2-3% in the U.S.
The true damage is probably less important that what it may
portend for all the others on the edge of bankruptcy.
We are fortunate to be only 25% invested in our personal
portfolio and in fact hold calls on the SDS (double short S&P
500)---essentially we have no risk in the downside at this
minute. Of course the models are at risk--although not
nearly the risk they would have if they were fully invested.
Expect treasuries to melt UP.
Safety Seekers Out in Force
November 20, 2009
Watching T-Bill yields this week has to make you wonder
what shoe is going to drop soon. While we have seen the 1
month bill trading with yields of 1 basis point quite a lot in
the last year-we have not seen the 3 month bill trading at
that level since last December. Here is a chart of 3 month
treasury yields for the last 2 years.
Obviously there is a dramatic rush to 'safety'. When it
happened in 2008 it happened as the equity markets were
crashing down.
To understand the overall market sentiment you need to
watch the t-bill rates---as we now see a lot of money piling
into instruments that will pay 10 cents a year (annualized)
on a $1000 investment. You have to believe that there are
some serious coming issues in the next couple of months if
you are willing to invest at these rates.
Market Euphoria Continues--Treasury
Bond Yields Plunge
November 16, 2009 11 pm
The melt up in the equity markets continues--seemingly
without an end in sight. It feeds on itself---here again what
are you going to do. We don't buy regular equities
generally so we just sit and watch what we are missing (or
not missing--since we are most happy to sleep well at
nights and collect our dividends and interest).
Interest rates are falling again---seemingly saying 'things
are tough out there'. The talking heads are quite happy not
facing up to the fact that gold is going crazy, the dollar is
falling daily, the federal government is issuing $100 billion
in new debt every month and I am afraid the housing and
employment situation is not even close to improving.
Regardless of the above we are hunting and buying good
income issues (while keeping one eye on the potential
economic surprises out there).
We have updated the High Quality Income Model---and it
has not done nearly as well as the High Yield
Model--gaining only 4.5% year to date. This is mostly a
function of being totally underinvested. On the other hand
we are happy with the portfolio being built and look forward
to better days ahead as the portfolio becomes more fully
invested.
Protective Life Corp.--Solidly in the
Black--a Number of Available Picks
November 16, 2009
Proptective Life Corp., which is a smallish life insurance
company located in Birmingham, Alabama has gotten the
company going back in the right direction--with the write
offs behind it. Like most insurers they had large write
downs last year and hopefully with the economy healing
they will not have those large negatives ahead.
The company has a number of issues available for the
income investor--3 trust preferred issues, 2 exchange
traded debt issues and of course the common shares which
carry a 2.75% yield.
The way we look at the available issues is they are 5 debt
issues and then the common. The 5 issues are all senior to
the common and of course somewhat safer.
The issues are
PLC Capital Trust IV--7 1/4% (Ticker--PL-PA)
PLC Capital Trust V--6 1/8% (Ticker--PL-PB)
PLC Capital Trust III--7 1/2% (Ticker--PL-PS)
Protective Life Capital Securities --7 1/4% (Ticker---PL-PD)
Protective Life 8% Senior Notes (Ticker--PLP)
All of these issues trade with current yields of 8.6 to
8.85%---super yields when they have become increasingly
hard to find. Only the PL-PD issue goes ex-dividend in
December if you are just looking to capture the dividend.
We will be adding a full 10% position (500 Shares) to our
High Quality Model Portfolio of the PL-PD issue today.
Chicken Investing Over--Back to the
Grind
November 11, 2009
We have determined that no one wants to look at the
realities of this dangerous market and the economy so we
just as well go about the business of getting the model
portfolios invested. Needless to say the good odds of a
'double dip' in this economy over the winter makes us quite
nervous.
Note that we have updated the High Yield Model and it has
been performing very well--up over 15% through November
2. We did sell just one item out of that portfolio--and now
will begin to add some more items in. The Blended and the
High Quality Income models remain underinvested and we
hope we will have time to get some more securities in
these in the weeks ahead.
It should be noted that we are staying away from the REIT
common stocks--as we have all year. Certainly there are
some decent companies out in that universe--but we just
don't care to buy the risk. Better to stay with the preferreds
that many of the companies have available.
We will be purchasing mostly exchange traded debt and
trust preferreds (as we have mostly done in the past) as
these are senior to all preferreds that are out there (Trust
Preferreds are preferreds issued by a trust which holds the
debt of the issuing corporation and receives interest from
the corporation which they then pay you as a dividend).
But beyond the above we will be watching this economy
damned closely as the employment situation, fuel prices
and consumer confidence are all negative and we could
easily tip this economy into recession in the months ahead.
| Check Income Issues Going ex-dividend |
Blended Income Model Portfolio End of
Year Review
January 11, 2010
We have gotten the Blended Income Model
Portfolio updated and the results for the year have
been pretty good---a gain of 11.6%--which is very
satisfying for a portfolio that has been only 50%
invested.
The gains break down like this---$3591 in
dividends and interest, $2824 on a realized gain
and $5161 on unrealized gains.
With a goal of 9% for 2010 we are going to have to
work hard to get further invested.
Year Review
January 11, 2010
We have gotten the Blended Income Model
Portfolio updated and the results for the year have
been pretty good---a gain of 11.6%--which is very
satisfying for a portfolio that has been only 50%
invested.
The gains break down like this---$3591 in
dividends and interest, $2824 on a realized gain
and $5161 on unrealized gains.
With a goal of 9% for 2010 we are going to have to
work hard to get further invested.
We Will Sell Stonemor Partners from High
Income Model Portfolio
February 24, 2010
We have decided it is time to sell Stonemor
Partners LP (STON) from our High Yield Model
Portfolio. Stonemor is a Master Limited
Partnership which has performed greatly for us.
As you know, if you have followed Stonemor, they
are a cemetery and funeral home company which
has paid a very healthy dividend ($2.20
annualized)---given that our model paid
$11.83/Share for the units in 12/2008 and they
closed today at $19.75 we have a huge gain.
The reason we are taking profits now is because
the current price may well have outpaced the
ability of the company to keep income up in this
poor economy. The companies income is derived
of net income from operations and income from
the 'Perpetual Trust'. We question whether either
of these will remain adequate to continue the high
payout level. The company went ex-dividend on
2/3 with a payout on 2/12 and is to report earnings
next month.
Part of the reason we are selling is because of the
falling fortunes of the casket makers-read more
here. Stonemor of course is fairly dependant
upon traditional death care versus cremation and
thus the more cremations and any reduction in the
average revenue generated by services will be a
hit to net income. We believe that if there is even
a hint of possible dividend cuts Stonemor will fall
quite dramatically.
On the flip side we simply have locked in a near
double on our investment (capital gain plus
dividends).
Income Model Portfolio
February 24, 2010
We have decided it is time to sell Stonemor
Partners LP (STON) from our High Yield Model
Portfolio. Stonemor is a Master Limited
Partnership which has performed greatly for us.
As you know, if you have followed Stonemor, they
are a cemetery and funeral home company which
has paid a very healthy dividend ($2.20
annualized)---given that our model paid
$11.83/Share for the units in 12/2008 and they
closed today at $19.75 we have a huge gain.
The reason we are taking profits now is because
the current price may well have outpaced the
ability of the company to keep income up in this
poor economy. The companies income is derived
of net income from operations and income from
the 'Perpetual Trust'. We question whether either
of these will remain adequate to continue the high
payout level. The company went ex-dividend on
2/3 with a payout on 2/12 and is to report earnings
next month.
Part of the reason we are selling is because of the
falling fortunes of the casket makers-read more
here. Stonemor of course is fairly dependant
upon traditional death care versus cremation and
thus the more cremations and any reduction in the
average revenue generated by services will be a
hit to net income. We believe that if there is even
a hint of possible dividend cuts Stonemor will fall
quite dramatically.
On the flip side we simply have locked in a near
double on our investment (capital gain plus
dividends).
What is 'The Yield
Hunter'?
We are not an investment
service--nor are we a
subscription service.
The Yield Hunter website is
simply the opinion of 1 person (TK
McPartland) who has been
investing for almost 40 years.
There are not really many good
websites for income
investors--unless you pay large
subscription fees (and then who
knows what you are getting).
We highlight many securities that
we like and buy ourselves.
Additionally we run some 'Model
Portfolios'-- testing some ideas
such as 'buy and hold'--'High
Yield'---etc.
We do not recommend securities
as everyone has their own
needs----and we are not licensed
investment advisors.
We are really beholden to no one
in our opinions--and since we
don't charge for our information
we are generally not looking for
feedback ---we realize we make
some typos--and certainly
everyone has their own
investment ideas.
Hunter'?
We are not an investment
service--nor are we a
subscription service.
The Yield Hunter website is
simply the opinion of 1 person (TK
McPartland) who has been
investing for almost 40 years.
There are not really many good
websites for income
investors--unless you pay large
subscription fees (and then who
knows what you are getting).
We highlight many securities that
we like and buy ourselves.
Additionally we run some 'Model
Portfolios'-- testing some ideas
such as 'buy and hold'--'High
Yield'---etc.
We do not recommend securities
as everyone has their own
needs----and we are not licensed
investment advisors.
We are really beholden to no one
in our opinions--and since we
don't charge for our information
we are generally not looking for
feedback ---we realize we make
some typos--and certainly
everyone has their own
investment ideas.
Time to Unload Another High Yield Holding
March 8, 2010
After large losses for last year (although better
than the year before)--including in the most recent
period for the Royal Bank of Scotland and the
revelation of large unfunded pension liabilities we
have decided to exit the ABN Preferred (Ticker
RBS-PG) (ABN was acquired by RBS) that we have
owned for 6 months.
Simply put these are non cumulative
preferreds--we have a good gain---and our belief is
they may not be able to continue to pay for their
dividends (essentially they are owned by the
British government--so who knows what the
politics may demand).
With the High Yield issues you must watch them
closer for 'surprises' which can absolutely kill
your portfolio.
March 8, 2010
After large losses for last year (although better
than the year before)--including in the most recent
period for the Royal Bank of Scotland and the
revelation of large unfunded pension liabilities we
have decided to exit the ABN Preferred (Ticker
RBS-PG) (ABN was acquired by RBS) that we have
owned for 6 months.
Simply put these are non cumulative
preferreds--we have a good gain---and our belief is
they may not be able to continue to pay for their
dividends (essentially they are owned by the
British government--so who knows what the
politics may demand).
With the High Yield issues you must watch them
closer for 'surprises' which can absolutely kill
your portfolio.
Blended Income Model Portfolio Updated
April 4, 2010
We have recently updated the Blended Income
Portfolio through 3/22/2010 and it has performed
very well. Since 1/1/2009 it is up 18.9% with 7.3%
of the gain being since 1/1/2010.
We are somewhat concerned with Windstream
(WIN) common shares as we believe they will
have trouble growing earnings from here thus
putting the dividend at risk and we are concerned
with Red Lion Trust Preferred (RLH-PA) as the last
earnings report was marginal. We may sell these
shares from this portfolio if an opportune time
(and price) presents itself.
April 4, 2010
We have recently updated the Blended Income
Portfolio through 3/22/2010 and it has performed
very well. Since 1/1/2009 it is up 18.9% with 7.3%
of the gain being since 1/1/2010.
We are somewhat concerned with Windstream
(WIN) common shares as we believe they will
have trouble growing earnings from here thus
putting the dividend at risk and we are concerned
with Red Lion Trust Preferred (RLH-PA) as the last
earnings report was marginal. We may sell these
shares from this portfolio if an opportune time
(and price) presents itself.
Marketday Short Blurbs
July 27, 2010
10 am CDT Great earnings all around---lousy
economic reports everywhere as well. Confusing.
July 20, 2010
9 am CDT--With equities falling off a cliff we see the 10
year Treasury falling into the 2.88% range this
week--likely bringing record low mortgage rates. Of
course if you have no home equity or no job it doesn't
really matter.
July 6, 2010
9:30 am CDT--A nice up equity market day with
interest rates primarily holding steady. After a few
days of sell off oil is up nicely which helps the
Canadian Royalty Trusts greatly. Generally we are
expecting a quiet day from here.
June 30, 2010
11 am CDT--wow--10 year treasury yields now at
2.91%. At least one positive is that some refi's of
homes is taking place at record low rates.
9:30 am CDT As we mentioned back on June 24--this
market is dangerous. We remain on hold all
around--models and personal portfolios--we generally
are holding up quite well and believe we are well
positioned to weather the downturns.
June 23, 2010
9 am CDT WOW-new home sales plunge. Part of our
new forecast will be a very down housing market
absent any new stimulus program. Interest rates are
moving lower yet.
June 22, 2010
12:30 pm CDT Interest rates have fallen back. 30 yr
mortgage rates now around 4 3/8%--wow--and housing
is still lousy--consumers are crawling in a hole--lack of
confidence is coming back.
9 am CDT Economic numbers are lousy--housing
really sucks. Markets are quiet and we are thankful
for that fact. We don't think the employment situation
or housing are going to improve much if any this year.
June 21, 2010
10:30am CDT Equities doing nicely--interest rates are
up somewhat. Complacency is back--but the quiet
markets, while nice, won't last long before another
shoe drops. We remain very cautious--not buying or
selling.
June 17, 2010
10 am CDT Terrible Philly Fed numbers this morning.
Interest rates have tumbled on the news.
8:15 am CDT Terrible employment numbers this
morning-as we kind of expected. Inflation is tame tho.
Seems like a quiet day--the type we like.
June 16, 2010
7:30 am CDT Housing starts and building permits way
down--no surprise here. Inflation appears very under
control.
June 15, 2010
Noon CDT Oil up, equities up, interest rates up--all on
air. Of course we don't care too much what equities
do---we just prefer slow moves.
The 1 month treasury still is at a basis
point---something is lurking out there that is going to
ambush the markets.
Oil price spikes have brought our royalty trust shares
back strongly--and all our holdings are doing super.
June 9, 2010
2:30 pm CDT This must be 'wipesaw Wednesday'.
Equities have fallen 150 points from the high of the day.
Also just a note--1 month Treasury yields are now at 6
basis points--obviously still a movement towards
safety. This does not portend anything good for the
equity markets ahead.
11:45am CDT Interest rates holding relatively flat, with
equities up nicely. Of course we would like to
buy--BUT can't as this economy is really in a negative
and we will see bunches of volatility just ahead.
9 am CDT Equity markets again somewhat
stronger--we think this is a good time to weed out weak
(lower quality) holdings and replace them with
something higher in quality, before the next downdraft.
June 7, 2010
11 am CDT A surprisingly quiet day--but we believe
meaningless as we are most convinced that things are
headed much lower. We can't tell exactly what we
think at this point until we formulate our mid-year
outlook--but it is not good for equities (although it may
be ok for us income people).
June 4, 2010
1 pm CDT Even a rougher day than we thought we
would have today. As always on a day that is a big
down equity day there is a silver lining--that being
much lower interest rates with the 10 Year Treasury
down around 3.2%.
So much for looking to get more invested---
8 am CDT Rough opening ahead. Really lousy jobs
numbers.
As we mentioned below this may be the 'shoe drop'
day as the rumor is Societe Generale (large French
bank) may have major losses with derivatives---and
also problems in Hungary.
June 3, 2010
2:45 pm CDT As suspected it is kind of a quiet
day--we are grateful.
WE MAY BE DETECTING A 'SHOE DROP' moment
coming in the days ahead. We have not been able to
figure it out yet, but there are signs of a movement to
'safety' which we haven't seen for a month. The 1
month Treasury yield which has been trading
consistently in the 15-17 basis points range for the last
30 days is now at 9 basis points. Over the last year
when we have seen this dip it has preceded a 'shoe
drop'. We assume it may be something in Europe--a
coming country downgrade--a major lender with major
problems etc. We will be watching.
8:15 am CDT After yesterdays strong performance
things are currently quiet--and we kind of think it will
remain that way today.
We are back on the search and will likely by something
yet this week--although we are concerned that we are
nearer a 'double dip' than we were a month ago. We
will likely avoid banking issues and stick more to the
utility preferreds and debt.
June 2, 2010
8 am CDT In general a quiet day so far--we are hopeful
that will continue--but don't count on it.
Our various portfolios are holding up well--plus a
little--minus a little.
June 1, 2010
8 am CDT A somewhat tough day shaping up for
equities. Oil and interest rates down as well.
Interestingly Canada raises interest rates--a different
economy up there.
July 27, 2010
10 am CDT Great earnings all around---lousy
economic reports everywhere as well. Confusing.
July 20, 2010
9 am CDT--With equities falling off a cliff we see the 10
year Treasury falling into the 2.88% range this
week--likely bringing record low mortgage rates. Of
course if you have no home equity or no job it doesn't
really matter.
July 6, 2010
9:30 am CDT--A nice up equity market day with
interest rates primarily holding steady. After a few
days of sell off oil is up nicely which helps the
Canadian Royalty Trusts greatly. Generally we are
expecting a quiet day from here.
June 30, 2010
11 am CDT--wow--10 year treasury yields now at
2.91%. At least one positive is that some refi's of
homes is taking place at record low rates.
9:30 am CDT As we mentioned back on June 24--this
market is dangerous. We remain on hold all
around--models and personal portfolios--we generally
are holding up quite well and believe we are well
positioned to weather the downturns.
June 23, 2010
9 am CDT WOW-new home sales plunge. Part of our
new forecast will be a very down housing market
absent any new stimulus program. Interest rates are
moving lower yet.
June 22, 2010
12:30 pm CDT Interest rates have fallen back. 30 yr
mortgage rates now around 4 3/8%--wow--and housing
is still lousy--consumers are crawling in a hole--lack of
confidence is coming back.
9 am CDT Economic numbers are lousy--housing
really sucks. Markets are quiet and we are thankful
for that fact. We don't think the employment situation
or housing are going to improve much if any this year.
June 21, 2010
10:30am CDT Equities doing nicely--interest rates are
up somewhat. Complacency is back--but the quiet
markets, while nice, won't last long before another
shoe drops. We remain very cautious--not buying or
selling.
June 17, 2010
10 am CDT Terrible Philly Fed numbers this morning.
Interest rates have tumbled on the news.
8:15 am CDT Terrible employment numbers this
morning-as we kind of expected. Inflation is tame tho.
Seems like a quiet day--the type we like.
June 16, 2010
7:30 am CDT Housing starts and building permits way
down--no surprise here. Inflation appears very under
control.
June 15, 2010
Noon CDT Oil up, equities up, interest rates up--all on
air. Of course we don't care too much what equities
do---we just prefer slow moves.
The 1 month treasury still is at a basis
point---something is lurking out there that is going to
ambush the markets.
Oil price spikes have brought our royalty trust shares
back strongly--and all our holdings are doing super.
June 9, 2010
2:30 pm CDT This must be 'wipesaw Wednesday'.
Equities have fallen 150 points from the high of the day.
Also just a note--1 month Treasury yields are now at 6
basis points--obviously still a movement towards
safety. This does not portend anything good for the
equity markets ahead.
11:45am CDT Interest rates holding relatively flat, with
equities up nicely. Of course we would like to
buy--BUT can't as this economy is really in a negative
and we will see bunches of volatility just ahead.
9 am CDT Equity markets again somewhat
stronger--we think this is a good time to weed out weak
(lower quality) holdings and replace them with
something higher in quality, before the next downdraft.
June 7, 2010
11 am CDT A surprisingly quiet day--but we believe
meaningless as we are most convinced that things are
headed much lower. We can't tell exactly what we
think at this point until we formulate our mid-year
outlook--but it is not good for equities (although it may
be ok for us income people).
June 4, 2010
1 pm CDT Even a rougher day than we thought we
would have today. As always on a day that is a big
down equity day there is a silver lining--that being
much lower interest rates with the 10 Year Treasury
down around 3.2%.
So much for looking to get more invested---
8 am CDT Rough opening ahead. Really lousy jobs
numbers.
As we mentioned below this may be the 'shoe drop'
day as the rumor is Societe Generale (large French
bank) may have major losses with derivatives---and
also problems in Hungary.
June 3, 2010
2:45 pm CDT As suspected it is kind of a quiet
day--we are grateful.
WE MAY BE DETECTING A 'SHOE DROP' moment
coming in the days ahead. We have not been able to
figure it out yet, but there are signs of a movement to
'safety' which we haven't seen for a month. The 1
month Treasury yield which has been trading
consistently in the 15-17 basis points range for the last
30 days is now at 9 basis points. Over the last year
when we have seen this dip it has preceded a 'shoe
drop'. We assume it may be something in Europe--a
coming country downgrade--a major lender with major
problems etc. We will be watching.
8:15 am CDT After yesterdays strong performance
things are currently quiet--and we kind of think it will
remain that way today.
We are back on the search and will likely by something
yet this week--although we are concerned that we are
nearer a 'double dip' than we were a month ago. We
will likely avoid banking issues and stick more to the
utility preferreds and debt.
June 2, 2010
8 am CDT In general a quiet day so far--we are hopeful
that will continue--but don't count on it.
Our various portfolios are holding up well--plus a
little--minus a little.
June 1, 2010
8 am CDT A somewhat tough day shaping up for
equities. Oil and interest rates down as well.
Interestingly Canada raises interest rates--a different
economy up there.